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Housing And Civil Enforcement Cases Documents





BANK, a division of First
American National Bank,




This Settlement Agreement is being filed for Court approval simultaneously with the United States' complaint against Deposit Guaranty National Bank ("DGNB" or "the Bank"), now a division of First American National Bank ("FANB"), alleging violations of the Fair Housing Act, Title VIII of the Civil Rights Act of 1968, as amended, 42 U.S.C. §§3601-3619 ("FHA"); and the Equal Credit Opportunity Act, 15 U.S.C. §§1691-1691f ("ECOA"). All of the allegations in the complaint relate to actions taken by DGNB prior to its merger with FANB. The United States has not alleged that FANB has engaged in any unlawful conduct.

More specifically, the United States alleges that DGNB violated both of these statutes by engaging in a pattern or practice of intentional racial discrimination in its underwriting of applications for home improvement loans.

The parties agree to the jurisdiction of this Court over this action.


1. DGNB operated as a bank in Mississippi, Louisiana, and/or Arkansas from approximately 1925 until being acquired by First American Corporation on May 1, 1998. As a result of the acquisition of Deposit Guaranty National Corporation by First American Corporation (FAC), DGNB is now wholly owned by FAC, a bank holding company headquartered in Nashville, Tennessee. On September 1, 1998, First American National Bank, a bank sub-sidiary of FAC, merged with DGNB. In the geographic areas which had been served by DGNB prior to its acquisition and merger, specifically including Mississippi, Arkansas, and Louisiana, FANB has continued to do business under the name of DGNB.

The allegations in the United States' complaint of unlawful discrimination relate to the home improvement lending activities of DGNB for the period January 1, 1995, through April 30, 1998, prior to its acquisition by FAC and merger with FANB. However, the remedial provisions of this Settlement Agreement, both monetary and injunctive, are judicially enforceable against FANB, as the corporate successor to DGNB, and any subsequent corporate successors.

2. The United States has alleged in its complaint that DGNB engaged in an unlawful pattern or practice of intentional discrimination on the basis of race in the underwriting of credit scored home improvement loans during the period January 1, 1995, through April 30, 1998.

During this time, DGNB used a custom credit scoring system to evaluate the creditworthiness of certain home improvement loan applicants.(1) The credit scoring system assigned point values to various information provided on an application form completed by each prospective borrower (and co-borrower, if applicable) which DGNB deemed relevant to loan risk assessment, such as income and length of employment in current job. DGNB also obtained the applicant's credit history, as well as a credit bureau score based on that history, from one of the three major national credit-reporting agencies. DGNB next converted the applicant-specific data used in its credit scoring process into an overall credit score for the applicant, a numerical value designed to increase as an applicant's apparent creditworthiness increases.

The ostensible purpose of a credit scoring system is to provide a lender with an objective estimate of the likelihood that a loan will be repaid as agreed by the applicant. Credit scoring systems are generally designed with the expectation that loan applicants who attain a score that is equal to or greater than the level indicating a likelihood of repayment that is acceptable to the lender (i.e., a passing score) will be approved, while those who do not (i.e., who get a failing score) will be denied the loan.

DGNB loan officers had broad discretion to make override decisions, known as judgmental overrides, for credit-scored loan applications -- that is, decisions to deny credit to applicants who scored at or above the stated cutoff score for loan approval ("high side overrides") and to grant credit to applicants who scored below that cutoff score ("low side overrides").

Information supplied by DGNB and made public through the Home Mortgage Disclosure Act (HMDA), 12 U.S.C. §§2801-2810, shows that from January 1, 1995, through December 31, 1997, DGNB processed at least 8,110 home improvement loan applications from white and African-American individuals. Of these 8,110 applications, 5,513 were submitted by white individuals (with a white co-applicant or no co-applicant), 493 of which DGNB denied, creating a white applicant denial rate of approximately 8.9%. Among the same 8,110 home improvement applications, 2,597 applicants were submitted by African-American individuals (with an African-American co-applicant or no co-applicant), 830 of which DGNB denied, creating an African-American denial rate of approximately 32.0%. The HMDA information submitted by DGNB during this time period contained approximately two-thirds credit scored and approximately one-third non-credit scored home improvement loan applications data. This case concerns only the credit scored home improvement loans.

In January 1997, the Office of the Comptroller of the Currency (OCC) began an examination of the lending practices of DGNB to evaluate its compliance with the ECOA. Based on information gathered in its examination, the OCC determined that it had reason to believe that DGNB was engaged in a pattern or practice of discrimination on the basis of race in its home improvement lending activities. In January, 1999, the OCC referred the matter to the Attorney General pursuant to the ECOA, 15 U.S.C. §1691(e).

Thereafter, the Department of Justice reviewed the analysis conducted by the OCC and the credit scores and files of home improvement applicants who were subject to DGNB's override system as described above.

The United States has alleged in its complaint, inter alia, that during the period at issue:

A. The OCC's investigation of DGNB revealed that: (1) there was a high level of underwriting decisions inconsistent with the credit scores of individual applicants; (2) each individual loan officer, rather than any centralized office, had discretional authority to make underwriting decisions; (3) criteria for underwriting decisions were inconsistently applied and poorly documented by DGNB; and (4) DGNB's monitoring of underwriting decisions was inadequate. In sum, DGNB established a loan approval process under which DGNB employees exercised subjective judgments with respect to home improvement loan applications and freely overrode the decisions indicated by applicants' credit scores;
B. Beginning at the latest on January 1, 1995, and continuing through April 30, 1998, DGNB imposed high-side overrides more frequently and granted low-side overrides less frequently to African-American loan applicants than it did to similarly situated white applicants;
C. The OCC's analyses concluded that, after con-trolling for all other facially neutral underwriting factors used by the Bank, African-American applicants for DGNB credit scored home improvement loans were at least three times as likely to be rejected as similarly situated white applicants during the relevant time period. The OCC also concluded that the difference in the results of DGNB's underwriting decisions concerning the home improvement loan applications made by African-Americans and those made by similarly situated whites could not have occurred by chance and cannot be explained by differences in the borrowers' loan qualifications or other neutral or legitimate business factors unrelated to race;
D. Therefore, through its practice of applying more stringent underwriting approval standards to African-American home improvement loan applicants than similarly situated white applicants, DGNB failed to implement its home improvement loan process without regard to race and violated the FHA and the ECOA.

3. DGNB denies the allegations in the United States' complaint. DGNB believes that non-discriminatory reasons exist that explain the disparities between white and black applicants. However, DGNB and its corporate successor, FANB, have agreed that, in order to avoid the costs and uncertainties of protracted litigation, this controversy should be resolved voluntarily. The parties have also agreed that there should be no evidentiary hearing, trial, or other adjudication on the merits, and that the entry of this Settlement Agreement is not to be construed as an admission by DGNB, or its successors, of the validity of any of the claims asserted by the United States in this action.

Therefore, on the basis of the foregoing representations of the parties, it is now hereby ORDERED, ADJUDGED, and DECREED that:


In order to ensure the fair and lawful treatment of all home improvement loan applicants without regard to race and to remedy the past allegedly discriminatory practices of DGNB from January 1, 1995, through April 30, 1998, DGNB (andFANBas its successor agree to the following terms.


4. DGNB, its officials, employees, and agents are permanently enjoined from discriminating on the basis of race against any person in making available, or in the terms and conditions of, a loan for improving, repairing, or maintaining a dwelling (a "home improvement loan"). Fair Housing Act, 42 U.S.C. §3605; Equal Credit Opportunity Act, 15 U.S.C. §1691(a)(1); Regulation B, 12 C.F.R. §202.

5. DGNB, its officials, employees, and agents are permanently enjoined from using the DGNB credit scoring system and/or the home improvement loan underwriting process that DGNB used at any time between January 1, 1995, and April 30, 1998.

6. The terms of this Order shall bind any successor in interest to DGNB, including any entity acquiring substantially all of the assets and/or liabilities of DGNB and any entity acquiring substantially all of the assets and/or liabilities of any previous successor institution to DGNB.

7. FANB represents that upon the completion of the acquisition of DGNB on May 1, 1998, FAC ceased the use of DGNB's underwriting policies and practices that allowed for discretionary overrides of home improvement loan applications by branch level loan officers and initiated the substitution of FANB's centralized underwriting policies and practices at all DGNB branches. Upon its merger with DGNB on September 1, 1998, FANB continued to apply its existing underwriting policies and practices at all DGNB branches. The underwriting policies and practices FANB applied to the DGNB branches, and which FANB continues to apply to the HMDA reportable lending programs at all its branches, include:

  • a policy of non-discrimination applicable to all credit transactions including the making, handling and processing of home improvement loan applications, which is articulated to all personnel;
  • the use of a uniform decision-making procedure through a centralized underwriting unit (currently known as the Consumer Loan Underwriting and Residential Lending Division), which is responsible for evaluating the creditworthiness of HMDA reportable loan applications, maintaining the soundness of its consumer loan portfolio, and ensuring the institution's compliance with all applicable consumer credit laws and regulations, including the Fair Housing Act and the Equal Credit Opportunity Act(2);
  • a second level of review of decisions concerning all denied loan applications by senior underwriting personnel to ensure consistent levels of assistance to applicants and the making of consistent underwriting decisions without regard to age, gender, national origin, or race;
  • a weekly compliance review of the Consumer Loan Underwriting decisions on all HMDA reportable loan applications by a committee of senior underwriters and credit management personnel with compliance respon-sibilities for consistency among product, amount, term, credit score, Beacon/Bureau score, and initial reasons for denial;
  • the implementation of limiting parameters on the percentage of credit scoring overrides allowable in the HMDA reportable loan approval decision-making process and the restriction of the authority to make policy level overrides of HMDA reportable loan applications to a small number of high level, management FANB personnel;
  • a monthly analysis of all HMDA reportable loan activity, which is reviewed quarterly by a committee of the FANB Board of Directors, that includes an evaluation of: disparity ratios of all markets in the Bank's assessment areas conducted by race and by loan type; the geographic distribution of loans in low and moderate income areas; the borrower income distribution of lending activity to monitor outreach to low and moderate income families and to identify outreach opportunities; and the market performance through aggregate comparisons of national and local area lending data and comparisons to other reporting financial institutions; and
  • required training of FANB personnel in the area of fair lending, including instruction on the requirements of the Fair Housing Act and the Equal Credit Opportunity Act.

FANB, as the successor in interest to DGNB, and all sub-sequent successors in interest shall continue to process all home improvement loan applications in all branches currently doing business as DGNB in a manner which ensures nondiscrimination in the underwriting decisions concerning HMDA reportable loan applications and maintains an effective compliance review pro-cess. In no circumstances during the duration of this agreement shall subjective discretion for underwriting decisions concerning home improvement loans be delegated to branch level loan officers at those branches currently doing business as DGNB. Further, personnel responsible for compliance with fair lending laws shall continue to monitor and review all HMDA reportable loan application decisions concerning applications obtained through DGNB branches to determine whether underwriting policies and practices are implemented in a uniform and non-discriminatory manner on, at least, a yearly basis.

If, at any time during the duration of this agreement, FANB, or any subsequent successor, determines to make a change in policy or practice that deviates substantially from the under-writing policies and practices described above, which may affect current DGNB branches, FANB, or any subsequent successor, shall inform the United States in writing of the substance of any anticipated modified policy or practice at least fifteen (15) days prior to implementing such policy or practice. A copy of the modified policy or practice shall be made available to the United States upon its request.


8. Within five (5) business days after entry of this Order, there shall be deposited the sum of three (3) million dollars ($ 3,000,000.00) into the DGNB Compensation Fund Trust Account (the "Compensation Fund"), to be administered at the direction of the Department of Justice. The Compensation Fund shall be deposited at the downtown Jackson, Mississippi branch of DGNB in an interest bearing account. The Compensation Fund shall accrue interest at the rate at least equal to the coupon issue yield equivalent of the average accepted auction price for the last auction of fifty-two week United States Treasury bills settled immediately prior to the date of the entry of this Agreement, in accordance with 28 U.S.C. §1961. The Bank shall provide written verification of the deposit of this sum of money into this account to the Department of Justice within three (3) business days thereafter. The interest that accrues on the monies in the Compensation Fund shall become a part thereof. The total amount of the Compensation Fund was determined by an estimated average monetary award of twelve thousand dollars ($12,000.00) per denied application of an estimated total number of identifiable, allegedly aggrieved persons from the period of January 1, 1995, to April 30, 1998. However, the actual amounts of monetary compensation that shall be distributed to each aggrieved person may vary from that amount. The United States has full and sole discretion in determining the identity of each aggrieved person eligible for relief from among the African-American individuals denied home improvement loans by DGNB during the relevant period and the amount of monetary compensation to be distributed to each such aggrieved person.

9. The Bank shall provide to the United States within ten (10) days of entry of this Order a complete electronically-stored data set of all applications for home improvement loans submitted to DGNB between January 1, 1995, and April 30, 1998. This data shall include all information electronically collected by DGNB concerning the fiscal history or credit worthiness of applicants. The Bank shall promptly provide to the Department of Justice any other information in its possession, custody, or control the Department may request in connection with the process of either identifying aggrieved persons or locating those persons after they have been identified. Upon reasonable notice, the Bank shall also allow the Department access to DGNB's files and records in connection with the process of either identifying or locating the aggrieved persons.

10. Within one hundred and twenty (120) days of the receipt of the complete electronically-stored data set described in paragraph 9, the United States shall provide to the Bank a list of persons it believes were aggrieved by the alleged dis-criminatory practices and the amount of the monetary award to be distributed among these aggrieved persons from the Compensation Fund. Within thirty (30) days of receipt of that list, the Bank shall notify all persons identified thereon by letter (as set forth in Appendix A) sent by certified/registered mail, return receipt requested, of this settlement and of their right to receive compensation thereunder. With this notification letter, FANB shall also enclose a copy of this Settlement Agreement, a release for them to sign (as set forth in Appendix B), and a stamped, addressed envelope for the return of the executed release. The Bank shall send the notification to the last known address of the individual. The letter shall notify each person that he or she must return the signed release no later than sixty (60) days after its confirmed receipt. If an identified aggrieved person is in receipt of the notification of his or her right to compensation under this Agreement and fails to return an executed release within sixty (60) days, the aggrieved person shall be deemed as having waived their right to compensation unless good cause can be shown to the United States for such delay.

The Bank shall promptly send a copy of each release received pursuant to this paragraph to counsel for the United States. The Bank shall maintain the originals of the releases.

11. Thirty (30) days after the mailing of the notification letters, the Bank shall notify counsel for the United States in writing of those persons for whom it has not received a receipt of mail verification card. The Bank shall make reasonable efforts during the following sixty (60) days to locate such persons, including through the use of an agreed upon locator service, and shall document those efforts. If another mailing address is obtained, the Bank shall again follow the notification procedures set forth in paragraph 10 above within thirty (30) days of receiving the new address information.

12. Within sixty (60) days after sending the initial mailing, and sixty (60) days after anysubsequent mailing, the Bank shall issue a check in the amount specified by the United States from the Compensation Fund to each aggrieved person from whom it has received a properly executed release. The Bank shall mail each check by registered/certified mail, return receipt requested, and shall confirm the issuance, mailing, and return of a mailing receipt verification card of all checks in writing to the Department of Justice.

13. Within thirty (30) days of the mailing of the checks, the Bank shall inform the United States in writing of the names and last known addresses of persons, if any, whose compensation checks have been returned as undeliverable. The United States may make further attempts to locate these persons and shall provide the Bank with such new addresses as it is able to deter-mine. If the United States provides the Bank with new address for these individuals, the Bank shall re-attempt delivery in the manner set forth in paragraph 12.

14. The costs of notifying and locating aggrieved persons, as set forth in paragraphs 10-13 above, shall be borne by the Bank, or its successors, and shall not be paid from the Compensation Fund or the interest accrued on the Fund.

15. The United States shall notify the Bank in writing when all claims have been satisfied or the time period for the submission of properly executed releases has expired and all efforts to locate missing aggrieved persons have been exhausted. Within ten (10) business days ofreceipt of this notice, the Bank shall designate an entity or entities dedicated to the advance-ment of minority home ownership opportunities and minority access to credit in the geographic areas in which DGNB does business to which it shall contribute any remaining money in the Compensation Fund. This designation shall be subject to the United States' approval. Within thirty (30) days of such approval, the Bankshall issue a check for the remaining money in the Compensation Fund to the designated entity or entities. The Bank shall send a copy of the check(s) issued to this group(s) to the United States.


16. The Bank, or any successor institution, agrees to retain all records, including records kept in electronic form, which are required to be retained by Federal Reserve Board Regulation B, 12 C.F.R. §202.12(b), with respect to applications for home improvement loans submitted to those branches now doing business as DGNB and those which relate to its fair lending compliance program for a period of three (3) years from the date of entry of this Settlement Agreement. These records shall specifically include, but not be limited to, the compliance analyses described in paragraph 7.

In addition, the Bank shall provide the United States with access to such materials, files, electronic records, and other records of home improvement applications in order to assess compliance with this Settlement Agreement upon reasonable written notice of at least ten (10) business days. The United States will keep all records and information relating to specific loan applicants confidential to protect the applicants' privacy rights.


17. The Court shall retain jurisdiction of this action for a period of three (3) years from the date of entry of this Settlement Agreement for the purposes of enforcing the provisions thereof. The parties hereto, and any successor in interest to DGNB, will endeavor in good faith to resolve informally any differences regarding interpretation and compliance with this Agreement prior to bringing such matters to the Court for resolution. At the conclusion of this three (3) year period, the jurisdiction of this Court shall expire unless the United States files a motion to extend the term of this Settlement Agreementbased on good cause shown. The United States shall have the burden of demonstrating why the term of this Settlement Agreement should not expire. The terms of this Agreement shall remain in effect during the pendency of any such motion.


18. This Agreement may be modified at any time during its duration by written agreement of the Bank and the United States or by written agreement of any successor in interest to DGNB and the United States, subject to the approval of the Court.

19. Any time limits for performance of obligations pursuant to this Settlement Agreement may be extended by written agreement of the parties.

20. Each party to this litigation shall bear its own costs.

ORDERED, ADJUDGED, and DECREED this day of , 1999.


The undersigned apply for and consent to the entry of this Order:

For the United States:




Attorneys, Housing & Civil Enforcement Section
Civil Rights Division
U.S. Department of Justice
P.O. Box 65998
Washington, D.C. 20035
(202) 514-4713


Assistant U.S. Attorney
188 East Capitol Street
Jackson, MS 39201
(601) 965-4480

For Deposit Guaranty National Bank,
First American National Bank and
First American Corporation:

Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
(202) 371-7103


Deposit Guaranty National Bank

One Deposit Guaranty Plaza

Jackson, Mississippi 39215

Re: United States v. Deposit Guaranty National Bank

Dear __________________:

As you may know, Deposit Guaranty National Bank has recently entered into a settlement agreement with the United States to resolve a lawsuit brought by the United States against the Bank. Please read this letter and the enclosed materials carefully as it may affect your rights.

In its lawsuit, the United States alleged that Deposit Guaranty National Bank discriminated against home improvement loan applicants on the basis of race in violation of the Fair Housing Act, Title VIII of the Civil Rights Act, 42 U.S.C. §§3601-3619, and the Equal Credit Opportunity Act, 15 U.S.C. §§1691-1691f. These allegations were based on the United States belief that the policies and practices of Deposit Guaranty National Bank resulted in some of our African-American customers being denied home improvement loans which similarly situated white customers were granted. Deposit Guaranty National Bank denies the allegations in the lawsuit and continues to assert that we have never discriminated on the basis of race in our home improvement loan business. However, in order to avoid the uncertainty and costs of protracted litigation, the Bank has agreed to this voluntary settlement. A copy of the settlement agreement which we have reached with the Department of Justice is enclosed with this letter.

The Department of Justice has determined that, according to our records, you applied for a home improvement loan sometime between January 1, 1995, and April 30, 1998, and were denied. Therefore, the Department of Justice has determined that you are entitled to a monetary compensation award under the terms of the settlement agreement in the amount of _____________ dollars ($__,____.00).

The Department of Justice believes the money you will receive, if you accept the terms of the release, is a fair settlement of the alleged violation of the law as it relates to your loan application. In addition, a federal district court judge has approved this settlement agreement to resolve the lawsuit. However, you are not required to accept this monetary award. If you do not want to participate in this settlement, you may decline to do so and thereby give up your right to receive money under this agreement. If you choose to decline this award, you may pursue any legal rights you might have individually with a private attorney of your own choosing.

If you choose to accept this award, you must sign a general release in which you agree to accept the monetary award in exchange for your agreement not to bring any legal action against Deposit Guaranty National Bank or its successor financial institutions on your own. Please read this General Release form carefully.

In order to receive this monetary award, sign the enclosed General Release form in the presence of a notary public and return it within sixty (60) days of receiving this letter.

Please return the signed, notarized General Release form in the stamped envelope enclosed for your convenience. The envelope is addressed to:

Deposit Guaranty National Bank

One Deposit Guaranty Plaza

P.O. Box __________

Jackson, Mississippi 39215

If you do not return the enclosed General Release form within sixty (60) days of receiving this letter, you will be ineligible for the monetary award. You may wish to make a copy of the signed release for yourself prior to returning it to the Bank.

The Bank will mail a certified check to you, in the amount specified above, by certified/registered mail, after you have returned your signed, notarized release. You may not receive the check for your monetary award for thirty (30) to sixty (60) days after returning the signed, notarized release to us as processing the total number of awards may take some time.

If you have any questions, you may contact the Department of Justice at 1-800-___-____. Please follow the voice instructions after you are connected. Be sure to leave your name, the name of this case, your telephone number, and a time at which you may be reached at that number.

Please be aware that the government attorneys can not act as your private attorney. However, you may consult with a private attorney of your own at any time if you wish. If you do retain an attorney concerning this matter, please have them contact the attorneys for the United States. Those inquiries may be addressed to:

Housing & Civil Enforcement Section Civil Rights Division U.S. Department of Justice P.O. Box 65998 Washington, D.C. 20035-5998

Attn: U.S. v. Deposit Guaranty National Bank

Please inform the United States of any change in your address at the telephone number or address listed above. You may become ineligible for a monetary award for failure to inform the United States of any change in your address.


Deposit Guaranty National Bank



relating to

United States v. Deposit Guaranty National Bank

In consideration of the receipt of a monetary award of _________________ dollars ($ .00) to be paid to me/us by Deposit Guaranty National Bank, I/we, (name(s)) hereby agree, effective upon receipt of the payment, to release and forever discharge Deposit Guaranty National Bank, and all current, former and future officers, directors, employees, agents, institutions, affiliated parties, parent companies, affiliates, and successors-in-interest, specifically including First American National Bank, from all legal and equitable claims or causes of action that have been or might be asserted by me, as of the date of the execution of this Release, that arise out of any alleged discrimination with respect to the underwriting by Deposit Guaranty National Bank of home improvement loan(s) for which I/we applied.

I/we acknowledge that I/we understand and am waiving my/our right to pursue my/our own legal action by accepting this payment. I/we further acknowledge that a copy of the Settlement Agreement between Deposit Guaranty National Bank and the United States has been made available to me/us.

I/we understand that there will be only one compensation payment even though there may have been two or more co-applicants on the loan application and that the above-designated payment will be the total compensation paid to me/us arising out of the loan application at issue.

This Release constitutes the entire agreement between myself, any co-applicants, and Deposit Guaranty National Bank and any successor institutions. This Release may not be amended or modified by oral agreement.

I/we have read this Release and understand the contents hereof, and I/we execute this Release of my/our own free act and deed.

Signed this day of , 1999.


Social Security Number - -

[signature of co-applicant, if applicable]

Social Security Number - -


COUNTY OF _________________

PERSONALLY appeared before me, the undersigned authority in and for the jurisdiction aforesaid, the within named person(s) _______________________________________, who being duly sworn acknowledged that he/she/they signed and delivered the above and foregoing Release on the day and year therein mentioned.

GIVEN under my hand and official seal, this _________ day of _______________________, 1999.


Notary Public

My Commission Expires:

1. The parties agree that the average amount of the home improvement loan applied for by DGNB's customers during the relevant time period was approximately $5,000.

2. Pursuant to this policy, FANB eliminated the decision-making authority, including the discretion to make override decisions, with respect to home improvement loan applications previously provided to DGNB branch level loan personnel. > >

Updated June 13, 2023