The Consumer Financial Protection Bureau (CFPB) and the Department of Justice (DOJ) have taken action against Hudson City Savings Bank for discriminatory redlining practices, according to an announcement Thursday.
Hudson City was accused of denying access to mortgage loans from residents that dwell in majority-Black-and-Hispanic neighborhoods. Additionally, the CFPB and DOJ also alleged that the bank illegally provided unequal credit access to neighborhoods in New York, New Jersey, Connecticut, and Pennsylvania.
If the court approves the proposed consent order, Hudson City will pay the largest redlining settlement in history. The fines will include a $25 million in direct loan subsidies to qualified borrowers in the affected communities, $2.25 million in community programs and outreach, and a $5.5 million penalty.
"It is apparent to everyone that discriminatory practices in the mortgage market undermine people’s ability to buy a home and build long-term wealth," said Richard Cordray, CFPB director.
He added, "Without access to affordable credit to buy or improve a home, without a mortgage broker nearby, without a bank branch to offer basic services, neighborhoods deteriorate in the long shadow cast by discriminatory practices. The integrity of the consumer financial marketplace is diminished."
According to the announcement, the bank was allegedly found in direct violation of the Equal Credit Opportunity Act (ECOA), which prohibits creditors from discriminating against applicants in credit transactions on the basis of characteristics such as race, color, and national origin.
The DOJ also alleges that Hudson violated the Fair Housing Act.
Hudson City apparently found branches and loan officers, selected mortgage brokers, and marketed products to that discouraged potential borrowers in Black and Hispanic communities.
The complaint alleged that these discriminatory practices went on from at least 2009 to 2013.
“Hudson City Savings Bank structured its business operations to systemically avoid providing credit services in predominantly minority neighborhoods,” said U.S. Attorney Paul J. Fishman of the District of New Jersey. “There is no room for such behavior in our banking system. In addition to paying $25 million for a loan subsidy program, today’s settlement agreement will require the bank to take a number of concrete steps to ensure that they improve access to responsible and affordable credit to qualified borrowers in Black and Hispanic neighborhoods.”
The joint action alleges that Hudson City illegally avoided and thereby discouraged consumers in majority-Black-and-Hispanic neighborhoods from applying for credit by:
- Avoiding locating branches and loan officers in majority-Black-and-Hispanic communities.
- Avoiding using mortgage brokers in majority-Black-and-Hispanic communities.
- Excluding majority-Black-and-Hispanic communities from its marketing strategy.
- Excluding majority-Black-and-Hispanic neighborhoods from its credit in assessment areas.
In addition to the aforementioned fines Hudson City must also:
- Offer full-service banking in majority-Black-and-Hispanic communities.
- Expand assessment areas to include majority-Black-and-Hispanic communities.
- Assess the credit needs of majority-Black-and-Hispanic communities.
- Develop a fair lending compliance and training plan.
Click here to view the compliant filed in the U.S. District Court.
Click here to view the CFPB and DOJ joint announcement.