Consumer Finance Insights
March 10, 2017

HUD Reaches $1 Million Settlement with Illinois Bank Over Redlining Allegations

On March 10, 2017, the Department of Housing and Urban Development (“HUD”) announced that it reached a settlement with an Illinois bank resolving allegations that the bank engaged in illegal “redlining” of minority neighborhoods in the Rockford, Illinois metropolitan area.

HUD initiated its investigation after the Hope Fair Housing Alliance (“Hope”) filed a complaint with HUD, alleging violations of the Fair Housing Act (“FHA”), 42 U.S.C. §§ 3601-3619.  According to Hope, the bank engaged in several unlawful “redlining” practices through which lenders denied or avoided providing credit services in minority neighborhoods.

Specifically, Hope alleged the Illinois bank did not offer mortgage loans and other financial products in minority neighborhoods and operated only one branch office in a neighborhood that was more than 10% African American. Hope also alleged the bank provided better loan products and better financial advice to white borrowers than to African American or Hispanic borrowers.  ​

Under the terms of the settlement agreement, the bank agreed to (1) create a $1 million loan program to increase lending in minority neighborhoods; (2) pay a $75,000 donation to Hope; (3) offer credit counseling, home ownership seminars and direct mail outreach to increase lendi​ng opportunities in minority neighborhoods; (4) provide fair lending training to its staff members; and (5) evaluate the fea​sibility of opening a new branch in a minority neighborhood. The bank did not admit to any wrongdoing as part of the settlement.​

Enforcement Watch covered a similar redlining lawsuit on January 18, 2017, filed by the Department of Justice (“DOJ”) against a Minnesota bank.​​

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