On October 22, 2021 redlining hell broke loose.

  1. Trustmark – The Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ), in cooperation with the Office of the Comptroller of the Currency (OCC), took action today to put an end to alleged redlining by Trustmark National Bank. The CFPB and DOJ allege that Trustmark discriminated against Black and Hispanic neighborhoods by deliberately not marketing, offering, or originating home loans to consumers in majority-Black and Hispanic neighborhoods in the Memphis metropolitan area. The CFPB and DOJ also allege that Trustmark discouraged consumers residing in or seeking credit for properties located in these neighborhoods from applying for credit.
  • The settlement would:
    • Require Trustmark to put $3.85 million into a loan subsidy program for impacted neighborhoods, increase its lending presence there, and implement proper fair lending procedures.
    • Impose a $5 million civil money penalty against the bank, and will credit the $4 million penalty collected by the OCC toward the satisfaction of this amount.
  • Trustmark is a national bank headquartered in Jackson, Mississippi with 196 branches in five southern states. It currently operates 22 branches in the Memphis metropolitan area. This matter arose from the OCC’s examination that identified potential redlining, resulting in investigations by the CFPB and DOJ.
  • The complaint alleges that Trustmark:
    • Avoided locating branches in majority-Black and Hispanic communities.
    • Avoided assigning loan officers to majority-Black and Hispanic communities.
    • Failed to monitor its fair lending compliance.
    • Discouraged applicants and prospective applicants in majority-Black and Hispanic neighborhoods.
  1. Combatting Redlining Initiative – The Department of Justice announced the launch of a new Combatting Redlining Initiative. The new Initiative:
  • Represents the DOJ’s most aggressive and coordinated enforcement effort to address redlining, which is prohibited by the Fair Housing Act and the Equal Credit Opportunity Act.
  • Will be led by the Civil Rights Division’s Housing and Civil Enforcement Section in partnership with U.S. Attorney’s Offices. It will build on the longstanding work by the division that seeks to make mortgage credit and homeownership accessible to all Americans on the same terms, regardless of race or national origin and regardless of the neighborhood where they live.
  • Will:
    • Utilize U.S. Attorneys’ Offices as force multipliers to ensure that fair lending enforcement is informed by local expertise on housing markets and the credit needs of local communities of color.
    • Expand the department’s analyses of potential redlining to both depository and non-depository institutions. Non-depository lenders are not traditional banks and do not provide typical banking services, but engage in mortgage lending and now make the majority of mortgages in this country.
    • Strengthen DOJ’s partnership with financial regulatory agencies to ensure the identification and referrals of fair lending violations to the Department of Justice.
    • Increase coordination with State Attorneys General on potential fair lending violations.
  1. Robo-Redlining – CFPB Director Rohit Chopra said that the Bureau will be watching for “digital redlining, disguised through so-called neutral algorithms, that may reinforce the biases that have long existed.”
  • He continued, “Technology companies and financial institutions are amassing massive amounts of data and using it to make more and more decisions about our lives, including loan underwriting and advertising. While machines crunching numbers might seem capable of taking human bias out of the equation, that’s not what is happening.”
  • “When consumers and regulators do not know how decisions are made by the algorithms, consumers are unable to participate in a fair and competitive market free from bias. Algorithms can help remove bias, but black box underwriting algorithms are not creating a more equal playing field and only exacerbate the biases fed into them.”
  • “Given what we have seen in other contexts, the speed with which banks and lenders are turning lending and advertising decisions over to algorithms is concerning. Too many families were victimized by the robo-signing scandals from the last crisis, and we must not allow robo-discrimination to proliferate in a new crisis.”
  • “We should never assume that algorithms will be free of bias. If we want to move toward a society where each of us has equal opportunities, we need to investigate whether discriminatory black box models are undermining that goal.”

On December 14, 2021, Compliance Resource, LLC is presenting a webinar entitled Redlining – The Collision of Fair Lending and CRA. The program will cover all of the developments mentioned above, plus much more. The program will be conducted from 2:00 to 4:00 p.m. EST. Registration is available on our website.