FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
UNITED STATES OF AMERICA,
FIRST NATIONAL BANK
The United States of America alleges:
- This action is brought by the United States to enforce the provisions of Title VIII of the Civil Rights Act of 1968 (the Fair Housing Act), as amended by the Fair Housing Amendments Act of 1988, 42 U.S.C. §§3601-3619, and the Equal Credit Opportunity Act, 15 U.S.C. §§1691-1691f.
- This Court has jurisdiction of this action pursuant to 28 U.S.C. §1345, 42 U.S.C. §3614, and 15 U.S.C. §1691(h).
- Defendant, First National Bank of Vicksburg (hereinafter "First National"), is a national bank doing business in the State of Mississippi. First National is a subsidiary of First National Corporation incorporated in the State of Mississippi. Its principal place of business is at 1301 Washington Street, Vicksburg, Mississippi 39180. Its business includes engaging in residential real estate-related transactions and regularly extending credit to persons.
- As of June 1993, First National had approximately $238,514,000 in deposits, assets of $276,652,000, equity capital of $28,958,000, and 8 branch offices.
- As a national bank, First National is subject to the regulatory authority of the Office of the Comptroller of the Currency. As a federally regulated lending institution, First National is subject to federal laws governing fair lending, including the Fair Housing Act and the Equal Credit Opportunity Act.
- Since at least 1985, First National has offered and extended unsecured loans to individuals for the purpose of "improving, repairing or maintaining a dwelling" as defined by 42 U.S.C. §§ 3602(b) and 3605(b)(1)(A). (Hereinafter referred to as "unsecured, home improvement loans.") The unsecured home improvement loans offered by First National were either single payment loans, which are to be paid in full at maturity with no monthly payments, or amortized with monthly payments due during the loan term. The interest on single payment loans is calculated by the simple interest method.
- Until July 1993, the interest on amortized loans was calculated either as simple interest or add-on interest. The add-on interest method resulted in a significantly higher annual percentage rate than simple interest. Based on the bank's 1992 rates sheets, borrowers with add-on interest were assessed rates as high as 21.5% depending on the loan amount, and those rates were the highest permitted under the usury laws of the State of Mississippi. The interest rate on simple interest loans generally ranged from 9.5% to 10%. In July 1993, the bank discontinued using the add-on interest method for these loans in response to a fair lending investigation by the Comptroller of the Currency referred to in paragraph 8.
- In June 1993, the Comptroller of the Currency conducted an investigation of the lending practices of First National to evaluate its compliance with the Fair Housing Act and the Equal Credit Opportunity Act. Based on information gathered in its investigation, the Comptroller determined that he had reason to believe that First National had engaged in a pattern or practice of discrimination on the basis of race in the terms and interest rates charged to black borrowers for unsecured home improvement loans. Thereafter, the Comptroller referred this matter to the United States Department of Justice pursuant to the referral provisions of the Equal Credit Opportunity Act, 15 U.S.C. §1691e(g).
- During calendar year 1992, 97% (59 of 61) of First National's black customers for unsecured home improvement loans received amortized loans, while 49% (62 of 126) of the bank's white customers who received unsecured home improvement loans were given the more favorable and less expensive single payment loans. All but two of the black customers who received amortized loans were assessed add-on interest.
- First National offered certain customers who received amortized unsecured home improvement loans the opportunity to pay off their loans with simple interest rather than the more expensive add-on rate. Black borrowers who received amortized unsecured home improvement loans were rarely given the opportunity for simple interest loans. During calendar year 1992, 22.2% (14 of 63) of the bank's white customers but only 3.4% (2 of 56) of its black customers who received unsecured amortized home improvement loans were granted simple interest.
- The disparities in the rates at which First National's black customers received single payment unsecured home improvement loans, as described in paragraph 9, and the rates at which its black customers who received unsecured amortized home improvement loans received simple interest, as described in paragraph 10, are statistically significant, could not have occurred by chance, and cannot be explained by differences in the borrowers' loan qualifications or other, non-racial factors.
- Defendant First National has subjected its black customers to terms and conditions for unsecured home improvement loans that resulted in their paying more for their loans than similarly situated white customers.
- Defendant First National's policies and practices, as described in paragraphs 6 through 12, constitute:
- discrimination on the basis of race in the terms or conditions of residential real estate-related transactions in violation of Section 805 of the Fair Housing Act, 42 U.S.C. §3605(a); and
- discrimination against applicants with respect to credit transactions, on the basis of race, in violation of the Equal Credit Opportunity Act, 15 U.S.C. §1691(a)(1).
- Defendant's policies and practices, as described in paragraphs 6 through 12, constitute:
- A pattern or practice of resistance to the full enjoyment of rights secured by the Equal Credit Opportunity Act, as amended, 15 U.S.C. §§1691-1691f;
- A pattern or practice of resistance to the full enjoyment of rights secured by the Title VIII of the Civil Rights Act of 1968, as amended by the Fair Housing Amendments Act of 1988, 42 U.S.C. §§3601-3619; and
- A denial to a group of persons of rights granted by Title VIII of the Civil Rights Act of 1968, as amended by the Fair Housing Amendments Act of 1988, 42 U.S.C. §§3601-3619, that raises an issue of general public importance.
- Persons who have been victims of Defendant's discriminatory policies and practices as described above are aggrieved applicants or persons as referenced or defined under the Equal credit Opportunity Act and the Fair Housing Act. As a consequence of Defendant's policies and practices, these persons have been denied their rights to equal opportunity in credit and residential real estate-related transactions, and have suffered injury and damages as a result of Defendant's conduct.
- The racially discriminatory policies and practices of Defendant as described herein were, and are, intentional and willful, and have been implemented with reckless disregard for the rights of black persons.
WHEREFORE, the United States prays that the Court enter an ORDER that:
- Declares that the policies and practices of Defendant constitute a violation of Title VIII of the Civil Rights Act of 1968, as amended by the Fair Housing Amendments Act of 1988, 42 U.S.C. §§3601-3619, and the Equal Credit Opportunity Act, 15 U.S.C. §§1691-1691f;
- Enjoins Defendant, its agents, employees and successors, and all other persons in active concert or participation with it, from discriminating on account of race in any aspect of their residential real estate-related transactions;
- Requires Defendant to develop and submit to the Court for its approval a detailed plan that: (a) remedies the vestiges of Defendant's discriminatory policies and practices; and (b) ensures that future black applicants are treated in a nondiscriminatory manner that does not differ from the treatment afforded to white applicants for credit.
- Awards such damages as would fully compensate the victims of Defendant's discriminatory policies and practices for the injuries caused by the Defendant;
- Awards punitive damages to the victims of Defendant's discriminatory policies and practices; and
- Assesses a civil penalty against Defendant, in order to vindicate the public interest.
The United States further prays for such additional relief as the interests of justice may require.
JAMES P. TURNER
Acting Assistant Attorney General
Civil Rights Division
PAUL F. HANCOCK
Chief, Housing and Civil Enforcement Section
RICHARD J. RITTER
THOMAS J. KEARY
U.S. Department of Justice
Civil Rights Division
Housing and Civil Enforcement Section
P.O. Box 65998
Washington, D.C. 20035-5998
GEORGE L. PHILLIPS
United States Attorney > >