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Financial Services Law Insights and Observations

DOJ announces redlining settlement with New Jersey bank

Federal Issues DOJ Enforcement Redlining Consumer Finance Fair Housing Act ECOA CRA Fair Lending

Federal Issues

On September 28, the DOJ announced a settlement with a New Jersey bank to resolve allegations that the bank engaged in a pattern or practice of lending discrimination by engaging in “redlining” in the Newark metropolitan area in violation of the Fair Housing Act and ECOA. The DOJ’s complaint alleges that from at least 2015 to 2021, the bank failed to provide mortgage lending services to Black and Hispanic neighborhoods in the Newark metropolitan area. The DOJ also alleges that all of the bank’s branches were located outside of majority-Black and Hispanic neighborhoods and that these neighborhoods were also largely excluded from the bank’s marketing and outreach efforts.

Under the proposed consent order, the bank will, among other things, (i) invest a minimum of $12 million in a loan subsidy fund for majority-Black and Hispanic census tracts in the Newark metropolitan area, of which at least $150,000 per year will go towards advertising, outreach, consumer education, and credit counseling, and $400,000 will be spent on services to increase access to residential mortgage credit; (ii) establish new branches in neighborhoods of color, including at least one in the city of Newark, that will provide a full range of mortgage products; (iii) assign at least four mortgage loan officers dedicated to serving all neighborhoods in and around Newark; (iv) employ a full-time community development officer to oversee the continued development of lending in neighborhoods of color in the Newark area; and (iii) provide ECOA and fair lending training to employees and officials. The announcement cited the bank’s cooperation with the DOJ to remedy the identified redlining concerns. According to the announcement, this settlement represents the third-largest redlining settlement in DOJ’s history.