Court papers filed Wednesday provide for a $9 million settlement by Ohio-based banks to resolve allegations of lending discrimination in a practice known as “redlining” that was aimed primarily at blacks in cities in Ohio, and Indianapolis, according to officials.
“Redlining” is the discriminatory practice by banks or other financial institutions of denying or avoiding providing credit services to consumers because of the racial demographics of the neighborhood in which the consumer lives, officials said.
“Redlining has no place in the Southern District of Ohio,” said U.S. Attorney Benjamin C. Glassman of the Southern District of Ohio. “This office is committed to vigorously enforcing the guarantees of the Fair Housing Act and the Equal Credit Opportunity Act so that the people in our District can borrow without prejudice based on race and color.”
The settlement is subject to federal court approval.
The complaint alleges that Union and Guardian banks violated the Fair Housing Act and the Equal Credit Opportunity Act, which prohibit financial institutions from discriminating on the basis of race and color in their mortgage lending practices.
The lawsuit alleges that, from at least 2010 through 2014, Union and Guardian served the credit needs of the residents of predominantly white neighborhoods to a significantly greater extent than they served the credit needs of majority African-American neighborhoods.
Those neighborhoods are easily recognized because each of the four metropolitan areas in which the banks operate has long maintained highly-segregated residential housing patterns for African Americans.
Both banks are headquartered in Cincinnati and share common ownership and management.
As a result of the settlement, Union will open two full-service branches and Guardian will open one loan production office to serve the residents of African-American neighborhoods, officials said.
Union and Guardian will invest at least $9 million in majority African-American neighborhoods in the Cincinnati, Columbus, Dayton and Indianapolis metropolitan areas.
That investment includes $7 million in a loan subsidy fund to increase the amount of credit that Union and Guardian extend to residents of majority African-American census tracts.
In order to make residential mortgage loans available to residents of predominately African-American neighborhoods that were not adequately served by Union and Guardian, the banks will further invest $2 million in advertising, outreach, financial education and community partnership efforts.
The settlement also requires both banks to develop internal controls to ensure compliance with fair lending obligations and conduct fair lending training for their employees, according to officials.
“Lenders must treat all potential borrowers equally and fairly,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division. “This settlement embodies a win-win solution for all parties by increasing the volume of mortgage loans, driving economic activity and creating a level playing field for qualified borrowers.”