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Consumer Finance Insights
June 2, 2023

DOJ Reaches Settlement Over Bank’s Alleged Redlining

On May 31, 2023, the United States Department of Justice (DOJ), announced that it had entered into a settlement with a Philadelphia based bank and trust company over allegations that the bank had engaged in unlawful redlining in the Philadelphia metropolitan area.  In the Complaint, filed contemporaneously with the consent order in U.S. District Court for the Eastern District of Pennsylvania, the DOJ alleges that the bank’s practices violated the Fair Housing Act (FHA), 42 U.S.C. §§ 3601–3619, and the Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ 1691–1691f​, by failing to adequately service majority-Black and Hispanic neighborhoods in Philadelphia.

Specifically, DOJ alleged that, the bank excluded predominantly-Black and Hispanic census tracts from its Community Reinvestment Act (CRA), 12 U.S.C. §§ 2901-2908, “assessment areas,” and therefore that it’s lending practices did not meet the needs of the community that it served. DOJ alleged that it initiated its investigation after the Federal Deposit Insurance Corporation (FDIC) referred its findings from the FDIC’s consumer compliance examination of the bank. DOJ further alleged that the bank failed to adequately staff branches in majority-Black neighborhoods with loan officers and did not engage in meaningful marketing and outreach in minority communities around Philadelphia.  Under the consent order, the bank agreed to establish a $2.92 Million “Loan Subsidy Fund” for consumers applying for first mortgages, home improvement loans, and refinance loans in majority-Black and Hispanic census tracts in the bank’s lending area. The bank also agreed to spend at least $125,000 in partnership with community organizations in outreach and education programs and to spend at least $250,000 on advertising, outreach, financial education, and credit counseling within majority-Black and Hispanic census tracts.

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