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Financial Services Law Insights and Observations

DOJ and RI-based bank settlement agreement regarding redlining claims

Federal Issues Redlining Enforcement Discrimination Fair Lending Settlement Consumer Finance DOJ

Federal Issues

On September 27, the DOJ announced a $9 million settlement agreement with a Rhode Island-based community bank to resolve allegations that the bank engaged in a pattern or practice of lending discrimination by engaging in “redlining” in Rhode Island. The DOJ’s complaint claimed that from  2016 to at least 2021, the bank failed to provide mortgage lending services in majority-Black and Hispanic neighborhoods in Rhode Island. The DOJ also alleged that all of the bank’s branches were concentrated in majority-white neighborhoods, and that the bank did not take meaningful measures to compensate for not having a physical presence in majority-Black and Hispanic communities.

Under the proposed consent order, the bank will, among other things, (i) invest at least $7 million in a loan subsidy fund for majority-Black and Hispanic neighborhoods in Rhode Island to increase access to credit for home mortgage, improvement, and refinance loans, and home equity loans and lines of credit; (ii) invest $1 million towards outreach, advertising, consumer financial education, and credit counseling initiatives; (iii) invest $1 million in developing community partnerships to expand access to residential mortgage credit for Black and Hispanic consumers; (iv) establish two new branches, ensure at least two mortgage loan officers, and employ a “Director of Community Lending” in majority-Black and Hispanic neighborhoods in Rhode Island; (v) conduct a community credit needs assessment; and (vi) produce a fair lending status report and compliance plan and conduct fair lending training. The announcement cited the bank’s cooperation with the DOJ to remedy the identified redlining concerns.