JUSTICE DEPARTMENT TO TARGET REDLINING BY BANKS

The U. S. Department of Justice (USDOJ) announced on October 22, 2021 a multi-government effort to investigate and prosecute redlining, the illegal practice of banks discriminating against racial minorities or certain neighborhoods. In the effort, the Justice Department, the Consumer Financial Protection Bureau (CFPB), and the Office of the Comptroller of the Currency (OCC) also publicly announced that a filing of a new case  against Trustmark Bank for its allegedly discriminatory treatment of Black and Hispanic borrowers in Memphis, Tennessee. The USDOJ is currently investigating several redlining cases and expects it will be opening more in the coming months. The anti-redlining effort also will involve U.S. attorneys’ offices with local experience in these neighborhoods as well as state attorneys general. The CFPB will be focusing a lot of its effort on algorithmic redlining. Its director commented: “Digital redlining may simply ingrain old forms of discrimination.”

Despite the law, redlining has been continuing across the US, with very negative long-term effects on minority households. For example, the average net worth of a Black family is a small fraction of a typical white household, and homes in historically redlined neighborhoods are worth less than homes found in non-redlined communities. Far fewer Blacks own their homes than whites. The Census Bureau found that in 2020's first quarter 44% of Black families owned compared with 73.7% of White families.

This effort reverses that of the previous administration, which mostly did not pursue federal investigation of possible redlining cases. That administration brought its first redlining case in 2018, and largely dismantled the Civil Rights Division's investigatory expansion under the Obama administration.

The Justice Department, CFPB, and OCC reached a settlement against Trustmark National Bank that would satisfy allegations that the bank redlined against some Memphis neighborhods. Trustmark, a bank mostly in the South, will be required to open a mortgage office in a majority-Black and Hispanic neighborhood within the Memphis metro and contribute $3.85 million to a fund to create loan subsidies for borrowers in discriminated neighborhoods. This agreement also has the Bank making a civil $4 million payment to the OCC and a civil $1 million payment to the CFPB.

In a statement, Trustmark’s president/CEO said the bank entered into the settlements with the federal government “to avoid the distraction of protracted litigation and because we share the common goals of breaking down barriers to home financing and exploring innovative ways to help residents of underserved areas achieve the dream of homeownership.”

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Source: https://apnews.com/article/business-race-and-ethnicity-racial-injustice-tennessee-memphis-6008ad53f784c42ab2f4dc627e0af9c5.

https://www.washingtonpost.com/national-security/redlining-justice-lending-garland-crackdown/2021/10/22/33c527c0-3353-11ec-a1e5-07223c50280a_story.html.