The Justice Department today announced the launch of its new anti-redlining initiative. Redlining is an illegal practice whereby lenders avoid providing services to people living in colored communities because of the race or national origin of the people living in these communities. The new initiative represents the department’s most aggressive and coordinated enforcement effort to combat redlining, which is prohibited by the Fair Housing Act and Equal Credit Opportunity Act.
“Discrimination in lending goes against the fundamental promises of our economic system,” said Attorney General Merrick B. Garland. “If people are denied credit solely because of their race or national origin, their ability to participate in the prosperity of our nation is all but excluded. Today we are committed to counteracting modern redlining by making much greater use of our fair credit authorities. We will spare no resources to ensure that state fair lending laws are vigorously enforced and that financial institutions provide every American with an equal opportunity to obtain credit. ”
“Enforcing our fair lending laws is critical to ensuring that banks and lenders provide equal access to lending opportunities to colored communities,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “Equitable and fair access to mortgage loans is the cornerstone on which families and communities in our country can build prosperity. We know well that redlining is not a bygone problem, but a practice that is ubiquitous in the credit industry today. Our new initiative should send a strong signal to banks and lenders that we will hold them accountable when we fight racially discriminatory and national origin-based lending practices. ”
Redlining, a practice institutionalized by the federal government during the New Deal era and implemented then and now by private lenders, has had lasting negative effects. Homeownership remains the primary means of wealth accumulation for American families, and the deprivation of investment in and access to mortgage loan services for communities of color has contributed to families of color falling permanently behind home ownership rates and net worth compared to white families. The gap in home ownership rates between white and black families is wider today than it was in 1960, before the Fair Housing Act of 1968 was passed.
This initiative, led by the Housing and Civil Law Division of the Civil Rights Division in collaboration with the U.S. Attorney’s Office, will build on the division’s longstanding work to bring home equity and mortgage loans to all Americans. regardless of race or national origin and regardless of the neighborhood in which they live. The initiative will:
- Use US prosecutors as force multipliers to ensure fair lending enforcement is informed through local expertise about housing markets and local color communities’ lending needs.
- Expand the department’s analyzes of potential redlining to include both custodian and non-custodian institutions. Non-deposit lenders are not traditional banks or offer typical banking services, but rather operate mortgage loans and now issue the majority of mortgages in this country.
- Strengthen our partnership with financial regulators to ensure fair lending violations are identified and reported to the Department of Justice.
- Increased coordination with attorneys general in the event of possible violations of fair lending.
Trustmark National Bank comparison
In addition to today’s announcement of the initiative, the Department of Justice, the U.S. Attorney’s Office for the Western District of Tennessee, the Consumer Financial Protection Bureau (CFPB), and the Office of the Comptroller of the Currency (OCC) announced an agreement to clarify the allegations that Trustmark The National Bank was involved in awarding discrimination by redlining predominantly black and Hispanic neighborhoods in Memphis, Tennessee.
The consent order proposed by the parties was filed today in connection with a lawsuit in the US District Court for the Western District of Tennessee. The complaint alleges that Trustmark National Bank has violated the Fair Housing Act and Equal Credit Opportunity Act, which prohibit financial institutions from discriminating on their mortgage loans based on race, color, or national origin. The complaint also alleges that Trustmark National Bank has violated the Consumer Financial Protection Act, which prohibits offering or providing financial products or services to a consumer that do not comply with federal consumer finance law.
Specifically, the lawsuit alleges that from 2014 to 2018, Trustmark conducted illegal redlining in Memphis by avoiding predominantly black and Hispanic neighborhoods because of people’s race, color, and national origin, or by seeking credit for real estate in those neighborhoods. The complaint also alleges that Trustmark’s branches were concentrated in mostly white neighborhoods, that the bank’s loan officers were not serving the loan needs of the mostly black and Hispanic neighborhoods, that Trustmark’s reach and marketing avoided those neighborhoods, and that it was internal fair Trustmark lending policies and procedures were inadequate to ensure that the bank gave colored communities equal access to credit.
The department opened its investigation after one of Trustmark’s regulators, the OCC, referred the matter. Trustmark fully cooperated in this investigation and amicably settled the allegations.
“Trustmark has deliberately excluded and discriminated against black and Hispanic communities,” said Rohit Chopra, director of the Consumer Financial Protection Bureau (CFPB). “The federal government will work to rid the market of racist business practices, including those through discriminatory algorithms.”
“For most American families, home ownership is the foundation of economic success,” said Acting US Attorney Joseph C. Murphy Jr. for the Western District of Tennessee. “Fair lending practices that are required by federal law – and the enforcement of those laws – make for a better future for all Americans. Our office believes that enforcement actions of this kind are essential to a fair lending system that benefits all and we will continue to prioritize these cases. ”
“The OCC has a long history of strong partnership with the Department of Justice’s Housing and Civil Enforcement Department’s Civil Rights Department, which has alerted potential fair lending violations and shared our extensive auditor, economic and legal findings, as we did in the Have done Trustmark matter. “Said Acting Currency Auditor Michael J. Hsu. “Today’s announcement is important because it signals the unified and unqualified focus each of our agencies has placed on enforcing the Fair Housing Act and Equal Credit Opportunity Act. Our joint efforts are critical to addressing the discriminatory lending practices that create and exacerbate racial inequality in the financial system. ”
According to the proposed order of consent:
- Trustmark will invest $ 3.85 million in a loan subsidy fund to increase credit opportunities for current and future residents of predominantly black and Hispanic neighborhoods in the Memphis area; appoint at least four mortgage loan officers or community loan specialists for these neighborhoods; and open a loan production office in a black-majority Hispanic neighborhood in Memphis.
- Trustmark will allocate $ 400,000 to develop community partnerships to provide services that improve access to residential mortgage loans to residents of both Black and Hispanic neighborhoods in Memphis.
- Trustmark will provide at least $ 200,000 per year for advertising, public relations, consumer education, and credit repair initiatives in and around Memphis.
- Trustmark will pay the OCC and CFPB a total civil fine of $ 5 million.
- Trustmark has already established a Fair Lending Oversight Committee and appointed a Community Lending Manager to oversee these efforts and work in close coordination with the bank’s management.
In August 2021, the department announced a redlining agreement with Cadence Bank. As part of the settlement, Cadence will invest over $ 5.5 million to increase credit options for residents of Houston-majority black and Hispanic neighborhoods.
Individuals can report lending discrimination by calling the Department of Justice’s Housing Discrimination Tip Hotline at 1-833-591-0291 or filing an online report.