Bank Settles Discriminatory Lending Allegations for Over $1 Million

Gavel-House-Money-resizedOn December 1, the Department of Justice (DOJ) filed a complaint and proposed consent order in the District of Massachusetts, resolving alleged Fair Housing Act (FHA) and Equal Credit Opportunity Ac (ECOA) claims against a regional bank.  The complaint alleged that from 2011 to at least 2014, the bank engaged in a pattern or practice of racial discrimination in mortgage loan pricing.  Specifically, the government alleged that the bank charged at least 550 African American and Hispanic borrowers higher prices for mortgage loans than it charged similarly situated white borrowers.

According to the complaint, the bank used a target pricing policy to price its mortgages.  The bank assigned each loan officer a minimum price that the officer was expected to receive on each loan originated, regardless of factors such as borrower creditworthiness.  Loan officers were also allegedly permitted to price loans above that minimum price without approval and without reference to creditworthiness.  The complaint further alleged that loan officers serving a disproportionate number of minority borrowers had higher minimum prices than those serving mostly white borrowers, and that loan officers used their discretion to charge minority borrowers a higher loan price.  The DOJ alleged that, as a result, the average African American borrower paid about $2,500 more, and the average Hispanic borrower paid about $1,400 more, than the average white borrower.

In the consent order, the bank denied all allegations in the complaint and maintained that it has taken steps to mitigate the potential do disparities in loan pricing based on race or national origin.  Pursuant to the order, however, the bank is enjoined from engaging an any discriminatory lending practice, and must implement new mortgage loan pricing and compensation policies.  The bank must also implement a monitoring program to ensure compliance, and implement an employee training program.  Finally, the bank will also place $1,175,000 in an account to compensate consumers harmed by these practices.