The Department of Justice (DOJ) announced yesterday that it has reached a settlement with a Michigan bank which will result in: (a) a new loan production office in an African-American neighborhood in Saginaw, Michigan; (b) an investment of $165,000 in majority African-American areas in and around Saginaw; and (c) further steps as part of a settlement to resolve allegations that it engaged in a pattern or practice of discrimination on the basis of race.

The case was filed in the U.S. District Court for the Eastern District of Michigan. The complaint alleges that the bank violated the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (EOCA), which prohibit financial institutions from discriminating on the basis of race in their lending practices.  The lawsuit alleges that between 2006 and 2009, the defendant served the credit needs of residents of predominantly white neighborhoods in the Saginaw and Flint metropolitan areas to a significantly greater extent than it served the credit needs of majority African-American neighborhoods.  The DOJ argued that those neighborhoods are easily recognized because the Saginaw area has long had highly-segregated residential housing patterns.   

Under the terms of the settlement, the bank will invest $75,000 in a special financing program to increase the amount of credit the bank extends to majority African-American neighborhoods in and around Saginaw, $75,000 in partnerships with organizations that provides credit, financial, homeownership, and/or foreclosure prevention services to the residents of these neighborhoods, and $15,000 in outreach that promotes its products and services to potential customers in these neighborhoods.  The bank will also open a loan production office in a majority African-American neighborhood of Saginaw and conduct fair lending training for its employees.  The agreement also prohibits the defendant from discriminating on the basis of race in any aspect of a credit transaction.   

Fair lending remains an important part of FHA compliance and enforcement. There are, of course, always two sides to every litigation and just because a case settles does not mean that any laws were violated. This settlement, however, continues to demonstrate that DOJ (and HUD) are continually reviewing data and analyzing information to determine if possible violations of law exist. 

Just A Thought.