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Housing And Civil Enforcement Cases Documents



This report is submitted pursuant to Section 1691f of the Equal Credit Opportunity Act, as amended, regarding the activities of the Department of Justice under the statute. This report covers the 2001 calendar year.


There were a total of ten fair lending referrals from the federal regulatory agencies during the year. The number of referrals received from the regulatory agencies has varied considerably over the past several years, ranging from 25 in 1997 to 5 in 2000. During 2001, five referrals were received from the Federal Deposit Insurance Corporation (FDIC); three from the Office of the Comptroller of the Currency (OCC); one from the Federal Reserve Board (FRB); and one from the Office of Thrift Supervision (OTS). Eight of these referrals have been returned to the agencies for administrative resolution. We are currently engaged in pre-suit negotiations in the OTS referral, and are investigating the allegations in one of the FDIC referrals. These referrals are described (by agency) below:

Federal Deposit Insurance Corporation

The FDIC made five referrals in 2001. We are conducting further investigation in one matter and have returned the other four for administrative handling.

We are investigating the referral in which FDIC concluded that a bank was charging Hispanic borrowers higher interest rates than it charged non-Hispanic borrowers for consumer loans secured by vehicles.

Two of the other referrals involved allegations that banks had policies which required spousal signatures before a loan application would be considered from an individual married applicant. Such a requirement violates the ECOA's prohibition against marital status discrimination where the individual applicant qualifies for a loan under the creditor's standards of creditworthiness. In each case, the bank revised its lending policy and has expressed willingness to take appropriate corrective action for any spouses who were aggrieved by the spousal signature policy. Accordingly, we returned both of these referrals for administrative resolution.

The fourth referral concerned a small bank which had a loan policy which required the consideration of an applicant's age in establishing the "equity-position" criterion for underwriting farm loan applications. The bank asserted that this was an archaic policy that had never been implemented and that present management did not even know what was intended by the term "equity-position." The FDIC's review of all denied farm loan applications for the statutory period revealed no loans denied for any conceivable definition of "equity-position." The bank has eliminated this policy and we have returned this referral for administrative resolution.

The final FDIC referral involved allegations that a small bank impermissibly considered borrowers' national origin in pricing loans. During a fair lending exam, a loan officer stated to the FDIC examiner that he charged Hispanic borrowers more because, in his opinion, Hispanics "are a greater credit risk because they might return to Mexico at any time." The FDIC's pricing analysis, however, revealed no bank-wide disparities based on national origin, but it did identify a total of eight Hispanic borrowers whose rates may have been influenced by the loan officer's apparent bias. In light of the small number of potential aggrieved persons, the bank's willingness to make restitution for these eight borrowers, and the fact that the loan officer is no longer employed by the bank, we returned the referral for administrative resolution.

Office of the Comptroller of the Currency

The OCC made three referrals during 2001. All three were returned for administrative resolution. One referral concerned a bank which offered a checking account product for persons of age 60 and above that included an overdraft feature at no additional cost. Under the ECOA, such a special-purpose credit program is restricted to persons 62 and over. The bank corrected the age requirement on this product. Another age discrimination referral involved a bank which applied different credit card underwriting standards based on age. Upon notification that such standards violate the ECOA, the bank immediately ceased to apply its age-specific underwriting standards, identified all potential aggrieved persons, and offered compensation for its discriminatory underwriting of their applications. The third referral involved allegations of marital status discrimination in conjunction with a bank's credit card program. The credit card application asked for the name of "spouse" rather than name of "joint applicant" for joint applications, and preapproved credit card solicitations could only be accepted by the addressee or the addressee's spouse. The bank expressed a willingness to adopt appropriate corrective measures.

Federal Reserve Board

The FRB made one referral during the year. It concerned a bank with a history of fair lending violations stemming from a lack of formal underwriting guidelines. Subsequent to the referral, this single-branch bank was purchased by a bank holding company with an outstanding fair lending compliance record over the past decade. All of the managers and directors of the referred entity were removed and the bank will be operated in accordance with the procedures of the acquiring entity. In light of these developments, we returned the referral for administrative resolution.

Office of Thrift Supervision

The OTS made one referral in 2001. It involved allegations that a bank discriminated in its subprime credit card programs on the basis of national origin (Hispanic), sex, marital status, age, and receipt of public assistance. Suit has been authorized in this matter and we are engaged in presuit negotiations against the bank and one of its third party affiliates. (This case is described in section II below).


In January 2001, we filed a settlement agreement in our suit against Associates National Bank (ANB), a case that had been filed in 1999, based on a referral from the OCC. Our suit alleged that ANB discriminated on the basis of national origin in one of its credit card programs by: (1) requiring higher credit scores for those applicants who applied on a Spanish-language application form; (2) offering lower credit limits to those Spanish-language applicants who were approved; and (3) failing to offer certain favorable credit promotions to Spanish-language account holders. After ANB was acquired by Citigroup, we reached a settlement whereby ANB agreed to pay $1.5 million to several hundred individuals the United States identified as having been disadvantaged by the challenged practices.

We are currently engaged in pre-suit negotiations in a case referred by the OTS involving allegations of discrimination. The complaint alleges that the bank failed to issue credit cards in compliance with the ECOA. The bank contracted with service provider companies to market and service its credit accounts. The more egregious ECOA violations occurred in the two programs that marketed the bank's credit card in conjunction with door-to-door sales of consumer goods. For example, the bank approved a discriminatory underwriting criteria in one program that provided less advantageous credit terms to persons who received public assistance and made it more difficult for younger applicants living at home to establish individual credit. Also, two programs discriminated on the basis of national origin - one denied credit to applicants who did not read and understand English, and another employed abusive collection practices on the basis of national origin.

We are assisting the Federal Trade Commission in its litigation against Capital City Mortgage Co. alleging violations of ECOA's reporting requirements, as well as the Federal Trade Commission Act (FTCA), the Truth In Lending Act (TILA), and the Fair Debt Collection Practices Act (FDCPA). A lawyer from our staff is assisting the FTC and will participate in this trial this spring. The Defendants have allegedly been engaged in a predatory lending scheme targeted specifically at African American neighborhoods and designed to facilitate default or foreclosure rather than repayment of the loans in violation of the Fair Housing Act and ECOA.


Although the Division did not file any new enforcement actions in 2001, we were developing a number of significant investigations. We continued to develop investigations of subprime lenders that disproportionately target high priced loan products to minority and elderly borrowers residing in the nation's central cities. Our central concern in these investigations is possible price discrimination based on race, ethnicity, sex, or age. However, each of these lenders may also be engaging in deceptive sales practices. We are seeking to determine whether such practices, if they exist, are unlawfully being made to fall more heavily on borrowers who are protected by the fair lending laws. We are concerned that a number of borrowers obtaining higher priced, and sometimes predatory loans, may qualify for lower priced prime loans.

In addition to subprime lending investigations, we continue to pursue investigations in several other lending areas. One is the Department's first business lending discrimination investigation. We are also pursuing an investigation of a lender that may involve redlining minority neighborhoods in one of the most residentially segregated cities in the country. Finally, we have continued our investigations into automobile lending practices to determine whether lenders discriminate by allowing dealers discretion to charge higher finance charges unrelated to non-discriminatory factors.


We continue to participate in an interagency taskforce convened by the Federal Reserve Board, with HUD, the Office of the Comptroller of the Currency (OCC), the Office of Thrift Supervision (OTS), the Federal Trade Commission (FTC), and the National Credit Union Association, to discuss predatory lending issues and make recommendations to the respective regulatory agencies as to the actions, whether joint or individual, that can be take to address abuses under existing law.

During the year, Division representatives continued an active program of speaking to lenders and industry associations, as well as advocacy groups and consumer organizations throughout the country, on our enforcement policies and expectations. We also continued to assist the bank regulatory agencies by providing assistance in training of field examiners on investigative techniques.


ECOA 2000 Report
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Updated June 13, 2023