Attorney General Merrick Garland revealed an inter-agency initiative to combat redlining and announced a settlement with Trustmark National Bank in Jackson, Mississippi, on federal allegations of credit discrimination.
The Justice Department, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency claim that the Trustmark with assets of 17 billion press conference Friday. They also say the bank has avoided opening branches in minority communities or hiring loan officers.
As part of the settlement – which was shared with reporters before it was officially filed later in the day – Trustmark agreed to pay a $ 5 million fine and invest $ 3.85 million in a loan subsidy fund to help to increase mortgage lending in the affected communities.
Trustmark, with 196 offices in five southern states, including 22 in Memphis, will also:
Open a credit bureau in a Memphis neighborhood with a majority of Black and Hispanic residents.
Spend $ 400,000 building partnerships that provide services to Memphis residents to improve access to mortgage credit.
Spend at least $ 200,000 annually on advertising, contact, and credit repair initiatives in Memphis. Trustmark has also failed to monitor fair lending compliance, regulators said.
Duane A. Dewey, President and CEO of Trustmark, said the bank – which has neither admitted nor denied wrongdoing – worked with regulators and closed the settlement "to avoid the distraction of lengthy litigation."
"We share a common goal of removing barriers to home finance and exploring innovative ways to help underserved areas live their dream of owning a home," Dewey said in a press release.
"You can expect more cases like the one you see today," said Attorney General Merrick Garland after announcing a $ 9 million settlement with Trustmark Bank, based in Jackson, Mississippi.
In a 26-page settlement order, the Justice Department stated that Trustmark "committed a pattern or practice of illegal redlining" from 2014 to 2018 in Memphis. Only four of the 25 full-service branches in the city were in census counts composed mostly of Black or Hispanic residents, although half of the Memphis census counts are minority majority, according to the settlement. The bank also operated seven limited-service branches in Memphis, but closed the only one that was in a majority-minority neighborhood, the settlement said.
The proposed settlement must be approved by the U.S. District Court for the Western District of Tennessee.
Garland said the Justice Department will tackle redlining through a new partnership between its civil rights division and U.S. law firms that will work in coordination with the CFPB and the OCC. The OCC referred the Trustmark case to the department.
Garland spoke of the fact that the homeownership gap between minorities and whites is wider today than it was in the 1960s. According to the US Census Bureau, the home ownership rate for whites is currently 74%, compared with 49% for Hispanics and 45% for blacks.
"Redlining remains an ongoing form of discrimination that harms minority communities," Garland said at a press conference. "If people are denied credit solely because of their race or national origin, their ability to participate in the prosperity of our nation is all but excluded."
The civil rights department has several redlining investigations pending and plans to open more in the coming months, he said.
"We will proactively seek to determine if credit institutions are redlining and if fair lending violations are found the Department of Justice will act," Garland said. "We don't waste time getting to work."
The Justice Department said federal agencies will step up enforcement of the Fair Housing Act and Equal Credit Opportunity Act.
CFPB director Rohit Chopra said one of the office's top priorities was to ensure fair lending and equal opportunities.
"Owning a home or a small business has long been a means of creating wealth and stability in the neighborhood," he said. "Many of our nation's policies in the past, such as redlining, have resulted in too many families and too many neighborhoods being excluded to have these opportunities."
Chopra also spoke about the increased use of algorithms and artificial intelligence in the provision of home loans. He said the CFPB will be paying attention to digital redlining.
"A lender should not be able to discriminate against or deter potential applicants from applying for a loan based on the neighborhood they are from," he said. "This is an endemic problem that requires everyone on deck."
Under the Trump administration, the CFPB only filed two fair lending enforcement orders and did not send any referrals to the Justice Department. That was a sharp drop in the Obama administration's activity.
Last year, the CFPB filed a lawsuit against Townstone Financial, a non-bank mortgage lender who prevented potential black homebuyers in Chicago from applying for home loans. In 2019, Freedom Mortgage agreed to pay $ 1.75 million for alleged violations of the Home Mortgage Disclosure Act.
Garland said, "You can expect more cases like the one you see today."