Citadel FCU Redlining Settlement Proves It’s Time To Bring Credit Unions Under Community Reinvestment Act Enforcement

The recent U.S. Department of Justice (DOJ) law enforcement settlement with Citadel Federal Credit Union is excellent evidence why the Community Reinvestment Act’s (CRA) omission of credit unions from its rules is a mistake, according to the National Community Reinvestment Coalition (NCRC). Citadel FCU agreed to a $6.5 million settlement regarding its alleged discouragement of homebuyers in Black and Hispanic neighborhoods of Philadelphia from applying for mortgages and systematically declined to make mortgages in those neighborhoods. Citadel maintains its innocence in the settlement.

“It no longer makes sense to let credit unions out of the common-sense obligations that CRA puts on traditional banks. Citadel’s alleged conduct in the case it just paid $6.5 million to settle is a timely demonstration of the problem and the need to enhance fair lending protections for credit union customers. Despite their public perception as a gentler, kinder, more community-minded provider of retail banking services, credit unions are just as capable of violating borrowers’ civil rights as any other financial institution. Whatever the driving causes underlying such violations, we know how to fix the problem: Supervise credit unions under CRA so that they can prove their actual actions live up to their public image.”

Such failures and business practices are commonly uncovered in traditional banking through regular federal CRA examinations, which are conducted every few years. Extending CRA to cover credit unions would both improve oversight and put new capital into neglected communities as the firms move into compliance with the law’s requirements. Bringing credit unions under CRA would ensure that they face an affirmative and binding obligation to those same people and communities.

Read the October 15, 2024 NCRC article.

Justice Department Secures Over $6.5M from Citadel Federal Credit Union for Redlining Philadelphia Area Black and Hispanic Communities

 

The U. S. Department of Justice (DOJ) just announced that Citadel Federal Credit Union has agreed to pay over $6.5 million to resolve allegations that it engaged in a pattern or practice of lending discrimination by redlining predominantly Black and Hispanic neighborhoods in and around Philadelphia in violation of the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA). This is DOJ’s first redlining settlement with a credit union under its Combating Redlining Initiative.

The DOJ complaint, filed in the Eastern District of Pennsylvania, alleges that, from at least 2017-2021, Citadel failed to provide mortgage lending services to majority-Black and Hispanic neighborhoods in and around Philadelphia and discouraged people wanting credit there from obtaining home loans. Citadel’s home mortgage lending was disproportionately in white areas around Greater Philadelphia. Similar lenders generated mortgage applications in predominately Black and Hispanic neighborhoods at almost three times that of Citadel and originated mortgage loans in these areas over three times Citadel's rate.

The complaint also alleges that Citadel’s branches are situated almost solely in majority-White neighborhoods, with no branches in Philadelphia, which has over 75% of the majority-Black and Hispanic neighborhoods and 34% of the total population in Citadel’s market area.

Under the proposed consent order, subject to court approval, Citadel has agreed to invest $6.52 million to increase credit opportunities for communities of color in and around Philadelphia. Citadel will:

• Invest at least $6 million in a loan subsidy fund to increase access to home mortgage, home improvement, and home refinance loans for residents of majority-Black and Hispanic neighborhoods in Philadelphia.
• Spend at least $250,000 on community partnerships to provide services related to credit, consumer financial education, homeownership, and foreclosure prevention for residents of predominantly Black and Hispanic neighborhoods in its market area.
• Spend at least $270,000 for advertising, outreach, consumer financial education, and credit counseling in predominantly Black and Hispanic neighborhoods in Philadelphia.
• Open three new branches in predominantly Black and Hispanic neighborhoods in Philadelphia.
• Hire a community lending officer to oversee the continued development of lending in communities of color.
• Hire independent consultants to strengthen its fair lending program and better meet the communities’ mortgage credit needs.
• Conduct a community credit needs assessment, evaluate its fair lending compliance management systems, and conduct staff trainings.

With assets of approximately $6 billion, Citadel is headquartered in Pennsylvania and has 24 branches in Greater Philadelphia, including Bucks, Chester, Delaware, Lancaster, Montgomery, and Philadelphia Counties. The second largest credit union in the area with over 263,000 members, Citadel cooperated with the DOJ investigation.

Since 2021, the DOJ's Combating Redlining Initiative, a coordinated enforcement effort to address this persistent form of discrimination against communities of color, has announced 14 redlining resolutions and secured over $144 million in relief for communities of color that have been the victims of lending discrimination. 

A copy of the complaint and information about DOJ’s fair lending enforcement work is at www.justice.gov/fairhousing. Individuals may report lending discrimination by calling the Justice Department’s housing discrimination tip line at 1-833-591-0291 or submitting a report online.

Read the October 10, 2024 DOJ press release.

CFPB and Justice Department Charge Fairway for Redlining Black Neighborhoods in Birmingham, Alabama

The Consumer Financial Protection Bureau (CFPB) and the U.S. Department of Justice (DOJ) took action to end Fairway Independent Mortgage Corporation’s illegal mortgage lending discrimination against majority-Black neighborhoods in the greater Birmingham, Alabama area. The CFPB and DOJ allege that Fairway illegally redlined Black neighborhoods, including through its marketing and sales actions. Fairway’s actions discouraged people from applying for mortgage loans in the Birmingham metropolitan area’s Black neighborhoods. If entered by the court, the settlement would require Fairway to pay a $1.9 million civil penalty to the CFPB’s victims relief fund. Fairway would also be required to provide $7 million for a loan subsidy program to offer affordable home purchase, refinance, and home improvement loans in majority-Black neighborhoods. Redlining is the illegal practice of denying the same access to credit to certain neighborhoods based on the racial or ethnic composition of those areas. 

Fairway is a non-depository mortgage company based in Madison, Wisconsin, and operates in the Birmingham area under the trade name MortgageBanc. In 2023, Fairway was the third largest mortgage lender, receiving over 100,000 applications and originating over $24 billion in loans. In this closely held company, Steve Jacobson is the majority owner.

The complaint describes how Fairway redlined majority-Black neighborhoods in the Birmingham Metropolitan Statistical Area (Birmingham MSA). During the period covered by the complaint, the Birmingham MSA included six counties in north central Alabama with a population of about 1.1 million. While Fairway claimed to serve the entire metropolitan area, it concentrated all its retail loan offices in majority-white areas, directed less than 3% of its direct mail advertising to consumers in majority-Black areas during 2018-2020, and discouraged homeownership in majority-Black areas by generating loan applications at a rate far below its peer institutions.

The CFPB and DOJ allege that Fairway violated the Equal Credit Opportunity Act, the Consumer Financial Protection Act, and the Fair Housing Act. Specifically, the government alleges problematic conduct by Fairway including:

• Failing to address known signs of discrimination: Fairway's own data showed that it was failing to serve majority-Black neighborhoods in the Birmingham area. Before October 2022, it took no steps to address redlining risk other than telling loan officers not to discriminate. Only 3.7% of Fairway’s applications during 2018-2022 were for properties in majority-Black areas, compared to 12.2% for similar lenders. This disparity was higher in neighborhoods with 80% or more Black residents, where it made loans at less than 1/8 the rate of its peer lenders. Fairway did not adopt any written plan for marketing or growth to address the concern.

• Redlining Black neighborhoods: From 2015 through 2022, Fairway operated three retail loan offices and three loan production desks in real estate offices in the Birmingham metropolitan area, all in majority-white areas. Fairway also relied on referrals from real estate professionals and others to generate applications, and the vast majority of Fairway’s referral sources and referred consumers were located in majority-white areas. Fairway predominantly directed its marketing to majority-white areas. By doing this, Fairway unlawfully discouraged mortgage loan applications for properties in majority-Black neighborhoods.

Under the Consumer Financial Protection Act of 2010 (CFPA), the CFPB has the authority to take enforcement action against institutions that violate federal consumer financial protection laws, including violations of the Equal Credit Opportunity Act and its implementing regulation, Regulation B. The DOJ agreed with CFPB’s claim that Fairway violated the Equal Credit Opportunity Act and its implementing regulation, and separately alleges that Fairway violated the Fair Housing Act.

The proposed order filed by CFPB and DOJ would require Fairway to:

• Pay a $1.9 million penalty: The penalty against Fairway would be paid into the CFPB’s Civil Penalty Fund, also referred to as the victims relief fund.
• Provide $7 million for a loan subsidy program: The order would require Fairway to offer home purchase, refinance, and home improvement loans on a more affordable basis than otherwise available in majority-Black neighborhoods in the Birmingham metropolitan area.
• Pay at least $1 million to serve neighborhoods it redlined to address some of the gap in credit access caused by its discriminatory activities. Fairway would be required to open or acquire a new loan production office or full-service retail office in a majority-Black neighborhood in the Birmingham metropolitan area, and will pay (2) at least $500,000 for advertising and outreach, (3) at least $250,000 on consumer financial education, and (4) at least $250,000 on partnerships with community-based or governmental organizations to serve neighborhoods previously redlined by the company.

Read the proposed order.

Consumers can submit complaints about financial products and services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

Employees who believe their company has violated federal consumer financial protection laws are encouraged to send information about what they know to whistleblower@cfpb.gov. To learn more about reporting potential industry misconduct, visit the CFPB’s website.

US Department of Justice Files Civil Rights Lawsuit Against Illinois Landlord for Sexually Harassing Tenants

 

The US Department of Justice (DOJ) filed a lawsuit on July 18, 2024 against Michael J. DeWitte, of Washington, Illinois, for sexually harassing female tenants and housing applicants in violation of the Fair Housing Act. The lawsuit, filed in the U.S. District Court for the Central District of Illinois, alleges that, since at least 2002, DeWitte harassed female tenants and applicants with unwelcome sexual harassment including sexual contact and comments about their physical appearances; offers to strip for female tenants; removing his pants while giving a tour to a female housing applicant; exposing his genitals to female tenants; asking female tenants on dates; requesting sex in exchange for reduced rent or other housing benefits; and evicting female tenants when they did not give in to his sexual advances. The lawsuit seeks monetary damages to compensate those harmed by the alleged harassment, civil penalties to vindicate the public interest, and a court order barring future discrimination.

Anyone who believes that they may have been victims of sexual harassment or other types of housing discrimination at rental properties owned or managed by Michael DeWitte, or who have other information that may be relevant to this case, may contact the Justice Department by calling the U.S. Attorney’s Office for the Central District of Illinois at 309-671-7019 or 833-591-0291, and emailing USAILC.Civil.Rights@usdoj.gov or FairHousing.USAILC@usdoj.gov.

The Justice Department’s Sexual Harassment in Housing Initiative is run by the Civil Rights Division, in coordination with U.S. Attorneys’ Offices. The initiative address es and raises awareness about sexual harassment by landlords, property managers, maintenance workers, loan officers, and others who have control over housing. Since beginning the initiative in 2017, the department has filed 44 lawsuits alleging sexual harassment in housing and recovered over $17 million for victims of such harassment. The Civil Rights Division is committed to protecting people from sexual misconduct.

Read the July 18, 2024 DOJ release. 

GE to Pay $1.5 Billion U.S. Fine overSubprime Mortgage Fraud.

April 12, 2019. General Electric Co will pay a $1.5 billion civil fine to resolve the US Department of Justice (DOJ) examination of defective subprime mortgages from its former WMC Mortgage unit before the 2008 global financial crisis. DOJ said the agreement resolves claims that GE concealed the poor quality of the loans and WMC’s lax fraud controls when packaging the loans into residential mortgage-backed securities that it then sold to misled investors. WMC was purchased by GE’s finance unit, General Electric Capital Corp, in 2004, and issued over $65 billion of mortgage loans in the next three years. DOJ said WMC overstated the quality of a majority of loans it packaged into residential mortgage-backed securities, and its fraudulent practices resulted in billions of dollars of investor losses. https://www.reuters.com/article/us-ge-settlement/ge-to-pay-1-5-billion-u-s-fine-over-crisis-era-subprime-mortgages-idUSKCN1RO233.