Recent Fair Lending Cases

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On March 4, 2010, the United States filed a fair lending complaint and consent order resolving United States v. AIG Federal Savings Bank and Wilmington Finance, Inc. (D. Del.). AIG Federal Savings Bank (FSB) and Wilmington Finance Inc. (WFI), two subsidiaries of American International Group, Inc., have agreed to pay a minimum of $6.1 million to resolve allegations that they engaged in a pattern or practice of discrimination against African American borrowers. The complaint alleges that the two violated the Fair Housing Act and the Equal Credit Opportunity Act when they charged higher fees on wholesale loans to African American borrowers nationwide on thousands of loans from July 2003 until May 2006, a period of time before the federal government obtained an ownership interest in American International Group Inc. The complaint further alleges that AIG FSB and WFI contracted with mortgage brokers to obtain mortgage applications that were underwritten and funded by the defendants and failed to supervise or monitor brokers in setting broker fees. Under the settlement, AIG FSB and WFI will pay up to $6.1 million to African American customers who were charged higher broker fees than non-Hispanic white customers and will invest at least $1 million in consumer financial education efforts and shall also be prohibited from discriminating on the basis of race or color in any aspect of wholesale home mortgage lending. This case resulted from a referral by the Treasury Department痴 Office of Thrift Supervision to the Justice Department痴 Civil Rights Division. The court entered the consent order on March 25, 2010.

On November 4, 2008, the court entered a consent decree in United States v. First Lowndes Bank (M.D. Ala.). The complaint, filed on September 29, 2008, alleged that the bank discriminated against African-American borrowers by charging them higher interest rates on manufactured housing loans than similarly-situated white borrowers, in violation of the Fair Housing Act and the Equal Credit Opportunity Act. This case resulted from a referral by the Federal Deposit Insurance Corporation. Under the consent order, the Bank is required to pay $185,000 to compensate borrowers who were charged higher rates and is enjoined from discriminating on the basis of race in its home mortgage lending. In addition, the bank is required to implement new procedures to prevent discrimination in setting interest rates, and provide enhanced equal credit opportunity training to its officers and employees who set rates for housing loans.

On September 30, 2008, the Court entered the consent decree in United States v. Nationwide Nevada, LLC (D. Nev.). The complaint, which was filed on September 29, 2008, alleged that Nationwide Nevada and its general partner, NAC Management, Inc., engaged in a pattern or practice of discrimination by refusing to finance car loans for consumers living on Indian reservations, in violation of the Equal Credit Opportunity Act. Under the consent decree, the company was required to pay $170,000 to compensate loan applicants who were denied loans due to their residence on an Indian reservation. Further, the company is enjoined from discriminating on the basis of race, color or national origin against loan applicants because they live on an Indian reservation, shall implement a non-discrimination policy stating that consideration of residency on an Indian reservation is not a valid basis for declining to purchase automobile sales finance contracts, and provide enhanced equal credit opportunity training to its officers and employees.

On August 21, 2007, the Division filed complaints and consent orders in United States v. Springfield Ford and United States v. Pacifico Ford (E.D. Pa.). The complaints allege that these two Philadelphia-area car dealerships engaged in a pattern or practice of discriminating against African-American customers by charging them higher dealer markups on car loan interest rates, in violation of the Equal Credit Opportunity Act (ECOA). Both dealerships cooperated fully with the Division's investigation. Under the consent orders, Pacifico Ford will pay up to $363,166, and Springfield Ford will pay up to $94,565, plus interest, to African-American customers who were charged higher interest rates. In addition, the dealerships agreed to implement changes in the way they set markups, including guidelines to ensure that the dealerships follow the same procedures for setting markups for all customers, and that only good faith, competitive factors consistent with ECOA influence that process. Both dealerships will also provide enhanced equal credit opportunity training to officers and employees who set rates for automobile loans.

On January 12, 2007, the United States filed a complaint and consent order in United States v. Compass Bank (N.D. Ala.). The consent order, resolves claims that Compass Bank violated the Equal Credit Opportunity Act by engaging in a pattern of discrimination on the basis of marital status in thousands of automobile loans that it made through hundreds of different car dealerships in the South and Southwest between May 2001 and May 2003. Specifically, the complaint alleges that the bank charged non-spousal co-applicants higher interest rates than similarly-situated married co-applicants. This case resulted from a referral by the Federal Reserve Board. To remedy the alleged discrimination, Compass Bank will pay up to $1.75 million to compensate several thousand non-spousal co-applicants whom the United States alleges were charged higher rates as a result of their marital status.

On October 16, 2006, the court entered the consent order in United States v. Centier Bank (N.D. Ind.). The complaint in this case was filed on October 13, alleging violations of the Fair Housing Act and the Equal Credit Opportunity Act. Specifically, the complaint alleged that the Bank unlawfully failed to market and provide its lending products and services on an equal basis to predominantly African American and Hispanic neighborhoods in the cities of Gary, East Chicago and Hammond. Under the agreement, Centier will open new offices and expand existing operations in the previously excluded areas, invest $3.5 million in a special financing program, and spend at least $875,000 for consumer financial education, outreach to potential customers, and promotion of its products and services in these previously excluded areas.

On April 27, 2006, the Division filed a complaint in United States v. First National Bank of Pontotoc (N.D. Miss.), the first sexual harassment lawsuit filed by the Justice Department under the Equal Credit Opportunity Act. The complaint alleges that William Anderson, a former vice president of the First National Bank of Pontotoc in Pontotoc, Mississippi, used his position to sexually harass female borrowers and applicants for credit. The complaint alleges that Anderson's conduct included making offensive comments of a sexual nature, engaging in unwanted sexual touching, and requesting or demanding sexual favors from female customers over a period of years before his employment with the Bank ended in May 2004.

During 2004, we filed and resolved fair lending cases alleging redlining of predominantly minority neighborhoods in two major metropolitan areas, in violation of the FHA and ECOA. The loan subsidy programs that are included as part of the remedial plan in both of these cases will have a direct and substantial impact in making housing more readily available to the residents of the formerly redlined areas.

U.S. v. Old Kent Bank (E.D. Mich.) involved predominantly African American neighborhoods of the Detroit MSA and was the Department's first case alleging discrimination in small business lending, as well as residential lending. Pursuant to the May 2004 settlement agreement, the bank's successor will open three new branch offices, spend $200,000 for consumer education programs, and spend $3 million to subsidize loans in the formerly redlined areas, which we project will total approximately $50 million in subsidized loans.

U.S. v. First American Bank (N.D. Ill.) involved the predominantly African American and Hispanic neighborhoods in the Chicago and Kankakee metropolitan areas, and alleged that the bank failed to provide residential, small business or consumer lending services. Pursuant to the July 2004 consent order, First American Bank will open four new branch offices, spend $700,000 on outreach and consumer education programs, and spend $5 million to subsidize loans in the formerly redlined areas, which we project will total approximately $80 million in subsidized loans.

Updated August 6, 2015

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