This post appears courtesy of Greg Friel, Deputy Assistant Attorney General for Civil Rights
The Department of Justice has worked vigorously and effectively to protect American consumers, ensure fair treatment for struggling borrowers, and seek justice for victims of discriminatory lending practices. The Civil Rights Division’s Housing and Civil Enforcement Section and its Fair Lending Unit enforce the federal fair lending laws, including the Equal Credit Opportunity Act (ECOA), Fair Housing Act (FHA), and Servicemembers Civil Relief Act (SCRA). This week, we submitted our annual report to Congress on our activities to enforce these laws and protect borrowers from any credit discrimination in any form.
In the four years since the Fair Lending Unit was established, the division has filed or resolved 34 lending matters under ECOA, FHA, and SCRA. This year’s enforcement actions bring the total amount for the settlements in these matters to over $1 billion in monetary relief for impacted communities and individual borrowers. These cases include the record $335 million settlement of a 2011 lawsuit against Bank of America for the activities of Countrywide Financial and the $234 million settlement of a 2012 lawsuit against Wells Fargo Bank. At the core of the Countrywide and Wells Fargo complaints was a simple story: if you were an African-American or a Hispanic borrower, you were more likely to be placed in a high-cost subprime loan or pay more for your mortgage loan than a similarly-qualified white borrower. After these and other settlements were entered, the division worked aggressively to locate victims of the alleged discrimination and ensure they were compensated in a timely manner.
The division’s fair lending enforcement efforts expand beyond mortgage lending to protecting borrowers from any form of credit discrimination. In December 2013, the division reached its largest ever auto lending settlement when Ally Bank and Financial Inc. agreed to pay $98 million for pricing discrimination in its automobile lending practices. The settlement provided $80 million in direct relief to African-American, Hispanic and Asian/Pacific Islander borrowers who were charged higher interest rate markups on auto loans than white borrowers with similar creditworthiness. The division continues to investigate potential discrimination based on race, national origin and gender in the setting of discretionary pricing in indirect automobile and motorcycle lending.
Collaboration, cooperation and partnership are critical to all we have accomplished. Much of our fair lending enforcement is done in conjunction with the banking regulatory agencies, including several joint enforcement actions with the Consumer Financial Protection Bureau. From 2009 to 2014, the bank regulatory agencies, the FTC and HUD referred a total of 147 matters involving a potential pattern or practice of lending discrimination to the Justice Department. Seventy-three of the 147 matters involved race or national origin discrimination, a combined total that is far higher than the 30 race and national origin discrimination referrals the division received from 2001 to 2008. We have also had great success in partnering with state attorneys general. In January 2014, we partnered with the North Carolina Attorney General’s office to investigate and eventually bring the division’s first case alleging reverse redlining in auto lending.
The division’s efforts over the past four years have made clear that the Justice Department will hold financial institutions, regardless of size and market share, accountable for lending discrimination in any form. While many lenders are making every effort to develop sound policies and eliminate or reduce the discretion that led to many of the abuses of the past, others are exploring new ways to exploit the most vulnerable and underserved in our communities. In the coming year, we will continue to enhance and refine the collaboration established over the last several years with our governmental partners and will continue to root out any new insidious methods that may perpetuate segregation or restrict access to fair and equal credit.