IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
UNITED STATES OF AMERICA,
SECURITY STATE BANK
The United States and Security State Bank of Pecos (Security
or the bank) stipulate as follows:
- The United States has this date filed its Complaint
against Security alleging violations of the Equal Credit Opportunity Act,
15 U.S.C. §§ 1691-1691f.
- The Complaint alleges that Security has engaged in a
pattern or practice of discrimination on the basis of national
origin in the extension of consumer loans that resulted in
Hispanic customers paying more for their loans than similarly
situated non-Hispanic customers. More specifically, the United
States alleges that at least since October 1, 1991, and
continuing at least until October 31, 1993, Security charged
Hispanic borrowers higher annual percentage rates (APRs) for
general consumer, non-mortgage related installment and single-payment loans
than the rates charged to similarly situated non-Hispanic borrowers.
- Security does not deny the allegations of the United
States. The bank emphasizes, however, and the United States does
not dispute that the pricing differences between Hispanics and
non-Hispanics were apparently caused by the actions of one
employee of the institution. When the staff of the bank's
primary federal regulator, the Board of Governors of the Federal
Reserve System (the Federal Reserve), documented the pricing
differences, the bank began to more closely monitor the
performance of the responsible employee, and that person is no
longer employed by the bank. The parties agree that the
controversy should be resolved without further proceedings and
without an evidentiary hearing. Therefore, the parties have
consented to the entry of this Stipulated Judgment as indicated
by the signatures appearing below.
The bank and the Federal Reserve have discussed the
development and implementation of appropriate plans, policies,
and procedures to avoid unlawful conduct in the future pursuant
to orders or agreements between the bank and the Federal Reserve.
This Judgment is designed to remedy the previous discriminatory
It is hereby ORDERED, ADJUDGED and DECREED:
Security, its employees, agents, and all other persons in active
concert or participation with Security are permanently enjoined
from imposing, on the basis of national origin, different terms
or conditions on any loan product, including general consumer,
non-mortgage related installment and single-payment loans
(consumer loans). The terms and conditions include, but are not
limited to the method of determining and calculating interest and
the interest rate.
Within thirty (30) days after execution of this Stipulated
Judgment, and throughout the term of this Stipulated Judgment,
every Security employee who regularly participates in decisions
of whether or not to extend consumer credit and/or participates
in decisions regarding the terms of such credit, and every
officer and director of Security shall be provided with a copy of
this Stipulated Judgment.
- Within forty-five (45) days after execution of this
Stipulated Judgment, Security shall send, by first class mail, to
counsel for the United States(1)
a proposed, written customer
assistance program designed to provide information to customers
and prospective customers relating to Security's consumer loans.
Such program shall be described in both English and Spanish, and
designed to provide, at a minimum, the following information to
potential customers regarding Security's consumer loans:
- The current terms of each type of consumer loan offered
- How to qualify for each type of consumer loan offered
by Security; and
- How to prepare a credit application.
- If, within thirty (30) days after receipt of the
proposed customer assistance program described above, counsel for
the United States indicates in writing to Security that it does
not agree with the proposed customer assistance program, then
counsel for the United States and Security shall seek to resolve
their differences within thirty (30) days. In the event that the
parties cannot agree, any dispute regarding the proposed customer
assistance program will be submitted to the Court within fifteen
(15) days to rule on same. If, within thirty (30) days after
receipt of the proposed customer assistance program, counsel for
the United States has no objection, counsel shall so inform
Security in writing.
- During the term of this Judgment, if Security wishes to
modify or alter the customer assistance program, Security shall
submit the proposed changes in writing to counsel for the United
States for review and approval.
- Information provided to the Federal Reserve by the bank
reveals that between the period of October 1, 1991, and October
31, 1993, non-Hispanics paid an average APR of 15.06% for an
unsecured loan, and an average APR of 13.20% for a secured
consumer loan (non-mortgage). The bank also has identified
Hispanics (by surnames) who received comparable loans during this
period. Each such Hispanic customer who paid an APR that was
higher than the average APR paid by non-Hispanic customers will
be deemed to have been aggrieved by the discriminatory pricing
practices, and will be entitled to compensation pursuant to the
terms of this Judgment. The United States estimates that there
were approximately three hundred and thirty (330) incidents
wherein Hispanic borrowers were charged more than the non-Hispanic average,
but some Hispanic borrowers were involved in
more than one incident.
- Within twenty (20) days of entry of this Judgment,
Security will provide the United States with a list of those
aggrieved persons as described in paragraph A of this Section.
- Security will make available any and all documentation
of the information necessary to meet the requirements of
Paragraph B above if requested by the United States. The United
States shall also, upon reasonable notice to Security, have
access to Security's records and files to verify the accuracy of
the list. The final list of aggrieved persons shall be subject
to approval of the United States.
- Within forty-five (45) days after entry of this
Stipulated Judgment, Security shall notify by letter all
aggrieved persons on the list by certified mail, return receipt
requested. The notification letters, the form of which shall be
subject to approval by the United States within five (5) days of
entry of this Judgment, shall be accompanied by a blank release
of all claims in the form of Attachment A. The notification
letter and the release of all claims shall be written in both
Spanish and English. Security shall promptly forward a copy of
each release received pursuant to this paragraph to counsel for
the United States upon receipt.
- no aggrieved person shall be paid any compensation
until after execution of a written release of all claims.
- Twenty (20) days after the mailing of the notification
letters, Security shall report to counsel for the United States
those names and addresses for whom no return receipt card has
been obtained. Security shall take reasonable steps within the
following sixty (60) days to locate such persons, and shall
document such efforts. The United States may also take steps to
locate such persons.
- Security shall set aside five hundred thousand dollars
($500,000) (compensation fund), to be distributed, pursuant to
the provisions set forth in Paragraph H below to each aggrieved
person on the list who delivers to Security an executed release
within sixty (60) days after receipt of a notification letter.
With respect to persons located by the United States, Security
shall similarly issue checks to each such aggrieved person who
delivers an executed release within sixty (60) days after receipt
of a notification letter and a blank release. All checks shall
be issued and mailed, by certified mail, return receipt
requested, within five (5) business days after receipt of an
- The monetary amount set forth in Paragraph G above
shall be distributed as follows:
- Each aggrieved person who was involved in at least one
incident as described in Paragraph A above, shall
receive one share of the compensation fund;
- Each aggrieved person who was involved in two or more
incidents as described in Paragraph A above, shall
receive, as additional compensation, one-half share of
the compensation fund; and
- The number of shares into which the compensation fund
shall be divided shall equal the number of aggrieved
persons increased by one-half for each aggrieved person
involved in two or more incidents.
Within thirty (30) days after the date of entry of this
Stipulated Judgment, Security shall pay the sum of ten thousand
dollars ($10,000) by check payable to the Treasurer of the United
States of America as a civil money penalty.
This Stipulated Judgment shall remain in effect for two (2)
- During the period of this Stipulated Judgment, Security
will retain all application files submitted for consumer loans
and all documents and notices relevant to any decisions regarding
such loans, including any documents relating to the terms of any
such loans. Security will retain all records relating to its
compliance with this Stipulated Judgment.
- Upon reasonable notice to counsel for defendant,
representatives of the United States shall be permitted to
inspect and copy all pertinent records of defendant at any and
all reasonable times; provided, however, that the United States
shall endeavor to minimize any inconvenience to defendant from
inspection of such records.
- Every six months during the term of this Stipulated
Judgment, defendant shall serve by first class mail, postage
prepaid, upon counsel for the United States, six-month reports.
Such reports shall include the name, address, telephone number,
and national origin of all persons who have applied for a
consumer loan, whether such applications were approved or denied,
and for each approved loan, the loan number, initial principal
amount, APR, date of origination, maturity date, whether the loan
was installment or single payment, whether the loan was secured
or unsecured, the manner in which the interest rate on the loan
was calculated, and the total cost of the loan for each borrower.
This action is dismissed without prejudice to the right of
either party to approach the Court regarding matters of
noncompliance with the terms of this Judgment. The parties to
the Judgment will endeavor in good faith to resolve informally
any differences regarding interpretation of and compliance with
this Judgment prior to bringing such matters to the Court for
Each party to this litigation will bear its own costs.
It is so ORDERED this _____ day of _________________, 1995.
UNITED STATES DISTRICT JUDGE
It is so agreed by the parties.
For the United States:
DEVAL L. PATRICK
ASSISTANT ATTORNEY GENERAL
PAUL F. HANCOCK
Chief, Housing and Civil Enforcement Section
BRIAN F. HEFFERNAN
SUNNY E. PIETRAFESA
Attorneys, Housing and Civil Enforcement Section
Civil Rights Division
U.S. Department of Justice
JAMES H. DeATLEY
UNITED STATES ATTORNEY
RAYMOND A. NOWAK
Texas Bar No. 15121490
Assistant U.S. Attorney
601 N.W. Loop 410, Suite 600
San Antonio, Texas 78216
For the Defendant:
WILLIAM M. KERR
Kerr, Fitzgerald & Kerr
P.O. Box 511
Midland, Texas 79702
STATE OF TEXAS
COUNTY OF REEVES
WHEREAS, I, [Releasor name] understand that the United
States Department of Justice ("United States") has conducted an
investigation of Security State Bank of Pecos ("Security State")
and has concluded that Security State has violated provisions of
the Equal Credit Opportunity Act;
WHEREAS, I have applied for and received (a) consumer
loan(s) with Security State;
WHEREAS, I understand that I might be entitled to damages if
the United States were successful in a lawsuit against Security
WHEREAS, I further understand that the parties have agreed
that, in order to avoid protracted and costly litigation, the
matter should be resolved by a Stipulated Judgment if the United
States secures General Releases from me and from certain other
consumer loan borrowers;
THEREFORE, contingent upon the United States securing
General Releases from me and others, and contingent upon entry of
a Consent Decree, I agree to the following:
In consideration of _______________________________ dollars to
be paid to me, I, [Releasor name], hereby agree, effective upon
receipt of payment, to release Security State and its current,
former, and future officers, directors, employees, agents, parent
companies, affiliates, and successors-in-interest from all legal
and equitable claims or causes of action that have or might have
been asserted by me or the United States as of the date of
execution of this General Release that arise out of any alleged
discrimination on the basis of national origin with respect to
any consumer loan(s) I received from Security State.
I acknowledge that I understand my right to pursue my own
legal action instead of participating in this settlement.
I waive any claims I may have against the United States
arising out of this action.
This General Release constitutes the entire agreement
between Security State, the United States, and me, without
exception or exclusion.
I have read this release and understand the contents hereof
and I execute this release of my own free act(s) and deed(s).
Signed this __________ day of ______________________, 1995.
SWORN TO AND SUBSCRIBED
before me on the ________ day of ____________, 199__.
1. For purposes of this Order, counsel for the United
States is Chief, Attn: (DJ #188-76-2), Housing and Civil
Enforcement Section, Civil Rights Division, United States
Department of Justice, P. O. Box 65998, Washington, D.C. 20035-5998.