On July 27, 2022, the Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ) filed a complaint and proposed consent order in a federal district court alleging that a mortgage company intentionally discriminated against families living in majority-minority neighborhoods around Philadelphia in violation of the Fair Housing Act (FHA), the Equal Credit Opportunity Act (ECOA), and the Consumer Financial Protection Act of 2010 (CFPA). The consent order, if entered by the court, would require the mortgage company to pay $18.4 million into a loan subsidy program designed to increase nondiscriminatory access to credit, a $4 million penalty to the CFPB for the victims’ relief fund, and an additional $2 million to fund advertisements targeting redlined areas. The Attorneys General of Pennsylvania, New Jersey, and Delaware have also entered into concurrent agreements with the mortgage company and its real estate services affiliate.
In their complaint, the CFPB and DOJ allege that the mortgage company redlined majority-minority neighborhoods through its marketing, sales, and advertising practices. For example, the complaint alleges that only white individuals were pictured in all fifteen of the mortgage company’s direct mail marketing campaigns between 2015 and May 2018. Additionally, the complaint alleges that the mortgage company’s open house flyers were overwhelmingly concentrated in majority-white neighborhoods, and its online advertisements appeared for home listings overwhelmingly located in majority-white neighborhoods. As a result, the mortgage company’s marketing campaigns and advertisements discouraged and ignored minority mortgage loan applicants, as demonstrated by its application data; only 12% of the company’s mortgage loan applications came from majority-minority neighborhoods, even though more than a quarter of neighborhoods in the Philadelphia area are majority-minority, and in neighborhoods that were more than 80% minority, more than half of the applications generated were from white applicants. The complaint also alleges that the mortgage company’s loan officers worked out of 53 different offices in the Philadelphia area, and only two of those offices were not in majority-white neighborhoods.
The CFPB’s and DOJ’s suit is part of a renewed coordinated effort by federal agencies to prioritize enforcement actions for fair lending violations. Within the past year specifically, for example, the DOJ has deployed an initiative to identify and combat redlining, and the CFPB has announced that in its supervisory operations it will closely examine financial institutions’ advertising practices to ensure that companies are appropriately testing for and eliminating illegal discrimination.