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Department Of Justice To Combat Racially Discriminatory Lending Practices

The U.S. Justice Department is launching an investigation into discriminatory lending practices through a new initiative called Combatting Redlining. According to the department’s press release, the campaign will mark the “most aggressive and coordinated enforcement effort to address redlining” in the department’s history.

Redlining is an illegal discriminatory practice used by lenders as a loophole to not provide service or offer services at higher interest rates to people of color or those who live in communities of color. Redlining was declared illegal by the Fair Housing Act and the Equal Credit Opportunity Act. 

“Lending discrimination runs counter to fundamental promises of our economic system,” Attorney General Merrick B. Garland said.

“When people are denied credit simply because of their race or national origin, their ability to share in our nation’s prosperity is all but eliminated. Today, we are committing ourselves to addressing modern-day redlining by making far more robust use of our fair lending authorities. We will spare no resource to ensure that federal fair lending laws are vigorously enforced and that financial institutions provide equal opportunity for every American to obtain credit,” he added. 

The initiative will be spearheaded by the department’s Civil Rights Division’s Housing and Civil Enforcement Section in conjunction with the U.S. attorney’s offices. It promises to ensure fair lending practices by increasing its cooperation with state attorney generals to catch potential violations and working with financial regulatory agencies to guarantee that claims are passed on to the Justice Department. 

“Enforcement of our fair lending laws is critical to ensure that banks and lenders are providing communities of color equal access to lending opportunities,” Assistant Attorney General Kristen Clarke for the Justice Department’s Civil Rights Division said.

“Equal and fair access to mortgage lending opportunities is the cornerstone on which families and communities can build wealth in our country. We know well that redlining is not a problem from a bygone era but a practice that remains pervasive in the lending industry today. Our new Initiative should send a strong message to banks and lenders that we will hold them accountable as we work to combat discriminatory race and national origin-based lending practices,” she added. 

CBS reports the new initiative will also heavily target the new form of digital redlining. Certain software algorithms used by banks to determine loan approvals could potentially be discriminating against neighborhoods of color and people of color based on old prejudiced practices. The Consumer Financial Protection Bureau (CFPB) will be devoting much of its attention to digital redlining, Director Rohit Chopra said.

Recently, CFPB and the Office of the Comptroller of the Currency (OCC) came to an agreement with Trustmark National Bank, resolving allegations that the lender was engaged in discriminatory practices by redlining Black and Hispanic neighborhoods in Memphis, Tennessee. As a response, the bank, which is worth $13 billion in assets, will pay the CFPB a $5 million penalty and the OCC a $4 million penalty, invest $3.85 million in a loan subsidy fund to increase credit opportunities for communities of color in the area. The bank will be required to put at least $600,000 toward programs and initiatives aimed at increasing diversity among homeowners.  

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