Mortgage Lending Discrimination
KeyBank & Capital One Lose Their Access To New York City’s Business
The NYC Banking Commission has voted to freeze deposits at the two megabanks over their refusal to tackle racial discrimination. KeyBank and Capital One will not receive further deposits from the City of New York after the unprecedented public vote by the Commission, which took the punitive action because the banks have refused to share information on their internal efforts to combat discrimination by failing to submit anti-discrimination plans. The New York City Comptroller Brad Lander, one of three members of the commission, also voted against allowing Wells Fargo, PNC, and International Finance Bank to hold public funds after they also failed to submit anti-discrimination plans.
In a public hearing, the Commission designated 26 banks to receive deposits from city agencies for the next two years. Despite the suspensions of Capital One and KeyBank, the two banks can service existing contracts for one year.
These actions come after the Commission in February strengthened its rules to make designated banks more accountable to the public by asking banks to provide detailed plans and specific steps to combat lending and employment discrimination. Banks are expected to provide approved banking products and services for city entities and must provide total collateralization for any money held.
“Good cities shouldn’t do business with bad banks, so it’s great to see the New York commissioners take action here,” the National Community Reinvestment Coalition (NCRC) commented. “KeyBank and Capital One have atrocious track records of not just under-serving but actively harming the interests of low-wealth communities and people of color. New York City moves a lot of money around in the course of everyday business, so some bank is going to make money by providing that service. But that profit opportunity shouldn’t go to banks like these that abuse the privileges of a federal bank charter while flouting the responsibilities that come with it.”
KeyBank’s refusal to provide the required documents to the Commission comes months after an NCRC report exposed the Cleveland-based lender’s worst-in-class performance on lending to non-White, non-wealthy borrowers. The bank in May agreed to a third-party racial equity audit after fair-lending groups and 80 community organizations asked federal regulators for an investigation into alleged redlining in the its mortgage lending practices. It claims that the current problem is a misunderstanding.
NCRC said that "Capital One, meanwhile, has repeatedly harmed the public, violated consumers’ rights, and rejected legal obligations not to discriminate." A Capital One spokesperson told Ameican Banker it does not encourage discrimination against employees and clients, and that what it submitted to city officials was “consistent” with past materials.
In April 2022, after City officials agreed to not to open any new depository accounts with Wells Fargo Bank after a Bloomberg report found the bank approved less than 50% of refinance applications from Black homeowners in 2020 but 72% from white borrowers. A Wells Fargo spokesperson told American Banker in an email at the time that “We are ready to continue serving [the city’s] needs today and well into the future.”
"NYC Regulator Halts City Deposits at Key Bank, Capital One," Banking Dive, May 26, 2023.