On May 7, 2015, the Department of Justice (DOJ) announced a settlement with a regional bank over allegations of discriminatory lending. In a Complaint filed in federal court, the Department of Justice alleged that the bank engaged in a “pattern or practice” of charging Hispanic or African American borrowers higher interest rates than white borrowers, in violation of the Equal Credit Opportunity Act. The allegations relate to the bank’s motorcycle lending practices. The bank administers its motorcycle lending programs through a variety of local motorcycle dealers who take consumers’ applications and submit them to the bank. Until early 2014, the bank allegedly allowed motorcycle dealers unfettered discretion to increase interest rates on these loans. The motorcycle dealers also allegedly received higher compensation from the bank when the dealers imposed higher interest rates. The DOJ stated that its investigation uncovered approximately 2,200 Hispanic or African American borrowers who were improperly charged higher interest rates than white borrowers with similar credit histories. Under the settlement, the bank will provide $395,000 in compensation to the victims. Notably, the settlement permits the bank to continue its current practice of compensating motorcycle dealers based on a percentage of the loan principal that is not tied to the interest rate.
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