COMPLY FAIR LENDING
Cases and Settlements
Department of Justice
On March 4, 2010, the United States filed a fair lending complaint and consent order resolving United States v. AIG Federal Savings Bank and Wilmington Finance, Inc. (D. Del.). AIG Federal Savings Bank (FSB) and Wilmington Finance Inc. (WFI), two subsidiaries of American International Group, Inc., have agreed to pay a minimum of $6.1 million to resolve allegations that they engaged in a pattern or practice of discrimination against African American borrowers. The complaint alleges that the two violated the Fair Housing Act and the Equal Credit Opportunity Act when they charged higher fees on wholesale loans to African American borrowers nationwide on thousands of loans from July 2003 until May 2006, a period of time before the federal government obtained an ownership interest in American International Group Inc. The complaint further alleges that AIG FSB and WFI contracted with mortgage brokers to obtain mortgage applications that were underwritten and funded by the defendants and failed to supervise or monitor brokers in setting broker fees. Under the settlement, AIG FSB and WFI will pay up to $6.1 million to African American customers who were charged higher broker fees than non-Hispanic white customers and will invest at least $1 million in consumer financial education efforts and shall also be prohibited from discriminating on the basis of race or color in any aspect of wholesale home mortgage lending. This case resulted from a referral by the Treasury Department’s Office of Thrift Supervision to the Justice Department’s Civil Rights Division. The court entered the consent order on March 25, 2010.
http://www.justice.gov/opa/pr/2010/March/10-crt-226.html
On November 4, 2008, the court entered a consent decree in United States v. First Lowndes Bank (M.D. Ala.). The complaint, filed on September 29, 2008, alleged that the bank discriminated against African-American borrowers by charging them higher interest rates on manufactured housing loans than similarly-situated white borrowers, in violation of the Fair Housing Act and the Equal Credit Opportunity Act. This case resulted from a referral by the Federal Deposit Insurance Corporation. Under the consent order, the Bank is required to pay $185,000 to compensate borrowers who were charged higher rates and is enjoined from discriminating on the basis of race in its home mortgage lending. In addition, the bank is required to implement new procedures to prevent discrimination in setting interest rates, and provide enhanced equal credit opportunity training to its officers and employees who set rates for housing loans.
http://www.justice.gov/opa/pr/2008/September/08-crt-864.html
On September 30, 2008, the Court entered the consent decree in United States v. Nationwide Nevada, LLC (D. Nev.). The complaint, which was filed on September 29, 2008, alleged that Nationwide Nevada and its general partner, NAC Management, Inc., engaged in a pattern or practice of discrimination by refusing to finance car loans for consumers living on Indian reservations, in violation of the Equal Credit Opportunity Act. Under the consent decree, the company was required to pay $170,000 to compensate loan applicants who were denied loans due to their residence on an Indian reservation. Further, the company is enjoined from discriminating on the basis of race, color or national origin against loan applicants because they live on an Indian reservation, shall implement a non-discrimination policy stating that consideration of residency on an Indian reservation is not a valid basis for declining to purchase automobile sales finance contracts, and provide enhanced equal credit opportunity training to its officers and employees.
http://www.justice.gov/opa/pr/2008/September/08-crt-863.html
On August 21, 2007, the Division filed complaints and consent orders in United States v. Springfield Ford and United States v. Pacifico Ford (E.D. Pa.). The complaints allege that these two Philadelphia-area car dealerships engaged in a pattern or practice of discriminating against African-American customers by charging them higher dealer markups on car loan interest rates, in violation of the Equal Credit Opportunity Act (ECOA). Both dealerships cooperated fully with the Division's investigation. Under the consent orders, Pacifico Ford will pay up to $363,166, and Springfield Ford will pay up to $94,565, plus interest, to African-American customers who were charged higher interest rates. In addition, the dealerships agreed to implement changes in the way they set markups, including guidelines to ensure that the dealerships follow the same procedures for setting markups for all customers, and that only good faith, competitive factors consistent with ECOA influence that process. Both dealerships will also provide enhanced equal credit opportunity training to officers and employees who set rates for automobile loans. http://www.justice.gov/opa/pr/2007/August/07_crt_639.html
On January 12, 2007, the United States filed a complaint and consent order in United States v. Compass Bank (N.D. Ala.). The consent order, resolves claims that Compass Bank violated the Equal Credit Opportunity Act by engaging in a pattern of discrimination on the basis of marital status in thousands of automobile loans that it made through hundreds of different car dealerships in the South and Southwest between May 2001 and May 2003. Specifically, the complaint alleges that the bank charged non-spousal co-applicants higher interest rates than similarly-situated married co-applicants. This case resulted from a referral by the Federal Reserve Board. To remedy the alleged discrimination, Compass Bank will pay up to $1.75 million to compensate several thousand non-spousal co-applicants whom the United States alleges were charged higher rates as a result of their marital status.
http://www.justice.gov/opa/pr/2007/January/07_crt_016.html
On October 16, 2006, the court entered the consent order in United States v. Centier Bank (N.D. Ind.). The complaint in this case was filed on October 13, alleging violations of the Fair Housing Act and the Equal Credit Opportunity Act. Specifically, the complaint alleged that the Bank unlawfully failed to market and provide its lending products and services on an equal basis to predominantly African American and Hispanic neighborhoods in the cities of Gary, East Chicago and Hammond. Under the agreement, Centier will open new offices and expand existing operations in the previously excluded areas, invest $3.5 million in a special financing program, and spend at least $875,000 for consumer financial education, outreach to potential customers, and promotion of its products and services in these previously excluded areas.
http://www.justice.gov/opa/pr/2006/October/06_crt_702.html
Federal Trade Commission
On September 20, 2010, Golden Empire Mortgage and its owner have agreed to settle FTC charges that they illegally charged Hispanic consumers higher prices for mortgage loans than non-Hispanic white consumers – price disparities that could not be explained by the applicants’ credit characteristics or underwriting risk. The settlement order permanently prohibits Golden Empire and Mr. Kootstra from discriminating on the basis of national origin in credit transactions, or otherwise failing to comply with the Equal Credit Opportunity Act and its implementing Regulation B. The order imposes a $5.5 million judgment that will be suspended when $1.5 million has been paid for consumer redress. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.
http://www.ftc.gov/opa/2010/09/gem.shtm
On December 16, 2008, Gateway Funding Diversified Mortgage Services, L.P. and its general partner, Gateway Funding Inc., agreed to a settlement which imposes a judgment of $2.9 million, all but $200,000 of which is suspended based on the defendants’ inability to pay. The full judgment will be imposed if they are found to have misrepresented their financial condition. The Commission did not seek civil penalties because of the defendants’ financial condition.
http://www.ftc.gov/opa/2008/12/gateway.shtm
On September 19, 2002 Citigroup Inc successor of Associates First Capital Corporation, agreed to a settlement in the amount of $215 million to resolve charges that the firms had engaged in systematic and widespread deceptive and abuse practices involving subprime lending. Among other obligations, the companies agreed to pay consumers $215 million in redress - the largest consumer protection settlement in FTC history.
http://www.ftc.gov/opa/2002/09/associates.shtm
Office of the New York State Attorney General
On December 5, 2006 Coutrywide Home Loans in its settlement regarding the issue of whether its loan pricing policies and practices discriminate on the basis of race and/or national origin, agreed to expand its ongoing monitoring of retail pricing-related discretionary decisions, compensate any black or Latino borrowers who improperly received subprime loans, implement a $3 million consumer education program, improve disclosure about the advantages, disadvantages, and relative costs of different mortgage products and features, enhance fair lending training for loan officers and pay $200,000 to the State of New York.
http://www.ag.ny.gov/media_center/2006/dec/dec05a_06.html
