On December 28, 2016, the Department of Justice (DOJ) announced a settlement reached with two Ohio-based banks regarding allegations of redlining. The complaint alleges that the two banks – Union Savings Bank and Guardian Savings Bank – avoided lending to and opening branches near residents in predominantly African-American neighborhoods for the period of 2010 through 2014 in four metropolitan statistical areas (MSA).
The proposed consent order requires that the banks:
- Open two full-service branches and a loan production office in African-American neighborhoods;
- Invest $9 million to expand the availability of credit in African-American neighborhoods;
- Invest $2 million in advertising and other efforts to make mortgage loans available in these areas;
- Conduct Fair Lending training for employees; and
- Develop and implement appropriate controls to ensure compliance with Fair Lending laws.
This settlement is just the latest in a series of Fair Lending settlements related to redlining. The available evidence indicates a persistent, multi-year focus on uncovering redlining discrimination by the DOJ and various federal, state and local agencies and consumer advocacy groups. Financial institutions should be proactive in monitoring their exposure to redlining risk and implementing the appropriate controls and corrective actions to address identified issues.