Two Ohio-based banks settle "redlining" allegations

Mortgage

A pair of banks based in Ohio must begin increasing mortgage lending in minority neighborhoods in certain areas of Ohio and Indiana as part of a settlement with the Department of Justice, which accused the banks of “redlining.”

The DOJ defines redlining as a “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.”

In this case, the DOJ accused Union Savings Bank and Guardian Savings Bank, which are based in Cincinnati and share common ownership and management, of redlining “predominantly African-American” neighborhoods in Cincinnati; Columbus, Ohio; Dayton, Ohio; and Indianapolis.

The complaint alleged that from at least 2010 through 2014, the banks extended credit to the residents of predominantly white neighborhoods to a “significantly greater extent” than they extended credit to majority African-American neighborhoods in the same cities.

According to the DOJ, 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.”

The DOJ said the lending practices of Union Savings Bank and Guardian Savings Bank were in violation of the both the Fair Housing Act and the Equal Credit Opportunity Act.

As part of the settlement, Union will open two full-service branches and Guardian will open one loan production office to serve the residents of the African-American neighborhoods in question, the DOJ said.

Additionally, Union and Guardian will invest at least $9 million in majority African-American neighborhoods in the Cincinnati, Columbus, Dayton and Indianapolis metropolitan areas.

According to the DOJ, that investment includes $7 million in a loan subsidy fund that will be used to increase the amount of credit that Union and Guardian extend to residents of majority African-American census tracts.

As part of the bank’s efforts to increase lending in the minority neighborhoods that “were not adequately served” previously by the banks, Union and Guardian will also invest $2 million in advertising, outreach, financial education and community partnership efforts. 

According to the DOJ, the settlement also requires that both banks develop “robust internal controls” to ensure that the banks are in compliance with fair lending obligations. The banks are also required to conduct fair lending training for their employees.

“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.”

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