Department of Justice Seal Department of Justice
FOR IMMEDIATE RELEASE
MONDAY, JULY 8, 2002
WWW.USDOJ.GOV
CRT
(202) 514-2007
TDD (202) 514-1888

JUSTICE DEPARTMENT SETTLES LENDING DISCRIMINATION SUIT
AGAINST FIDELITY FEDERAL BANK


WASHINGTON, D.C. Fidelity Federal Bank, FSB (Fidelity) of Glendale, California will pay $1.6 million dollars to settle allegations that it engaged in a pattern of discrimination against Hispanic borrowers through its relationship with third-party service providers, the Justice Department announced today.

Today's settlement agreement and order, submitted together with a complaint to the U.S. District Court in the Eastern District of New York, resolves allegations that Fidelity engaged in multiple violations of the Equal Credit Opportunity Act (ECOA).

According to the complaint, Fidelity issued and owned subprime credit cards which were marketed by third-party service providers. Subprime credit cards provide access to credit at higher prices to borrowers whose past credit performance or current debt and income status make them higher risks for lenders. The complaint charges Fidelity engaged in abusive collection practices by harassing customers on the basis of their Hispanic national origin and denying credit cards to applicants unable to read and understand English.

The complaint further alleged that Fidelity discouraged individuals who received public assistance from applying for credit cards, and that when applicants receiving public assistance actually applied for a Fidelity credit card, they were offered less favorable terms than similarly situated applicants who did not receive public assistance.

According to the complaint, Fidelity also violated the ECOA by requiring all members of a household to sign an application for a Fidelity credit card, and violated the record-keeping and notification requirements of the ECOA.

"Every borrower deserves to be treated with respect and dignity," said Assistant Attorney General for Civil Rights Ralph F. Boyd, Jr. "No one should be harassed based on their national origin or discriminated against based on the source of their income."

Under the settlement, Fidelity will:

provide $1.6 million dollars to compensate victims and to establish a consumer education program;

take steps to ensure that all applicants and borrowers seeking credit cards are treated in a fair

and non-discriminatory manner;

establish a training program for all bank employees involved in providing credit cards; and

develop a comprehensive compliance and risk program prior to offering any new credit program with third-parties.

The Office of Thrift Supervision (OTS), a federal financial regulatory agency, identified the problem during a May 1999 regularly scheduled compliance examination of Fidelity. After completing its examination, OTS referred the case to the Justice Department.

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