The Justice Department, the Consumer Financial Protection Bureau, and the Office of the Comptroller of the Currency announced that they have filed a new case against Trustmark Bank regarding its treatment of Black and Hispanic borrowers living in Memphis, Tennessee.
Despite the existence of half a century of laws to combat redlining, racism continues to be a problem across the country. The long-term consequences are still being felt today. A Black family's average net worth is only a fraction that of a white family, and homes in historically redlined areas are still less valuable than those in non-redlined areas.
In prepared remarks, Attorney General Merrick Garland stated that lending discrimination is contrary to the fundamental promises of our economic system. "When people are denied credit due to their race or nationality, their ability of sharing in the nation's success is almost eliminated."
Garland stated that the department is currently looking into several redlining cases, and anticipates opening more in the future.
Garland stated, "We will spare no resources to ensure that federal fair loan laws are vigorously enforced" and that all Americans have equal access to credit institutions.
The Justice Department also includes OCC and CFPB, which are two of the nation’s most important financial regulators. The U.S. attorney's offices that have local expertise in these areas will be involved, as well as the state attorneys general.
The department will also expand its analysis of bank lending activities in order to identify patterns of behavior.
Rohit Chopra, Director of CFPB, stated that "it's an endemic issue that requires all hands on deck."
Although there are still instances of redlining in the past, where banks exclude some neighborhoods, the Biden administration is focusing its efforts on modern-day redlining. This can often be due to the software and algorithms banks use to approve loans.
Chopra stated that the CFPB will focus a lot of its efforts on algorithmic redlining.
"Digital redlining could simply instill old forms of discrimination."
Federal efforts to investigate redlining cases were largely ignored by the Trump administration. Nearly two years after its inception, the Trump administration brought their first redlining case in 2018. It also largely dismantled Vanita Gupta's Civil Rights Division, which had under Obama tried to expand redlining investigations.
On Friday, the Justice Department, CFPB, and OCC reached a settlement with Trustmark National Bank that would resolve allegations that the bank had redlined certain Memphis neighborhoods.
Trustmark, a bank with assets of $13 billion primarily in the South, will have to open a mortgage branch in a majority-Black or Hispanic area within the Memphis metropolitan region. It will also need to contribute $3.85million to a fund that provides loan subsidies to borrowers from economically disadvantaged areas. For a total $5 million, the agreement includes a $4 million payment for the OCC and a $1 million payment for the CFPB.
Trustmark CEO and President Duane Dewey stated in a statement, that the bank cooperated fully with the DOJ's investigation "to avoid the distraction of protracted litigation." He said the discriminatory acts occurred between 2014 and 2016, and that the bank had made efforts to correct them.
