Justice Department to Target Redlining Among Banks

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WASHINGTON – Attorney General Merrick Garland on Friday launched a new Justice Department initiative to tackle discriminatory lending policies between banks, saying the practice harms minority communities and contributes to the racial wealth gap.

In remarks to staff, Garland cited the story of banks denying loans to black borrowers during the Great Depression – a tactic known as redlining – and warned that such practices remained prevalent over 90 years later. He said the ministry, together with other federal agencies, would mount the federal government’s “most aggressive and coordinated effort” to root out and punish those who violate federal laws prohibiting such practices.

“Our initiative alone will not erase the entire legacy of discrimination,” Garland said. “But we will spare no resources to ensure that federal fair loan laws are rigorously enforced.”

As part of the initiative, officials said, the Civil Rights Division of Justice will work with U.S. prosecutors’ offices across the country, as well as regulators from the Consumer Financial Protection Bureau and the Department of the Treasury, to investigate and prosecute banks for biased loans.

To punctuate the message, justice officials also announced a settlement in a federal redlining case against Trustmark National Bank in Memphis, saying the institution has agreed to invest $ 3.85 million in a grant fund for loans and dedicate loan officers as well as opening a credit bureau in a predominantly black or Hispanic neighborhood. The bank will also pay a civil fine of $ 5 million, federal officials said.

Federal authorities have said that from 2014 to 2018, Trustmark avoided areas where minorities lived, locating its loan offices in predominantly white neighborhoods.

The settlement with Trustmark comes after the Justice Department reached an agreement in August with Cadence Bank to invest more than $ 5.5 million to increase credit opportunities for black and Hispanic borrowers in Houston.

“Redlining is alive and well and has had a lasting negative impact,” said Deputy Attorney General Kristen Clarke, who oversees the Department of Justice’s civil rights division. “The end of redlining is a crucial step in bridging the growing wealth gap between communities of color and others. We have a duty to act now.”

In a statement, Duane Dewey, chairman and CEO of Trustmark, said the bank has entered into agreements with the federal government “to avoid the distraction of protracted litigation and because we share the common goals of breaking down barriers to real estate financing and explore innovative ways. to help residents of underserved areas realize their dream of homeownership. “

Dewey pointed out that the bank has already implemented new programs to increase services to minority neighborhoods.

Experts said redlining has contributed to generational inequalities, as black families have had more barriers than white families to buying a home and being able to pass that asset on to their children. In the first quarter of 2020, for example, 44% of black families owned their homes, compared to 73.7% of white families, according to the Census Bureau.

“Today, a white family is 30% more likely to own a home than a black family,” Garland said, noting that the gap is “bigger than it was in 1960”.

Federal officials said their efforts would not be limited to traditional forms of redlining, but would also tackle digital forms of unfair lending based on computer algorithms that offer loan advertisements or underwriting guarantees to certain potential customers, while leaving out other groups.

These tactics are “often more subtle and difficult to detect, and more resource-intensive to find,” said Michael Hsu, acting currency controller at the Treasury Department.

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