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From Banking and Finance Law Daily, December 29, 2016

Ohio-based banks pay $9M to settle discriminatory lending charges

By Lisa M. Goolik, J.D.

Union Savings Bank and Guardian Savings Bank will pay $9 million to settle charges that the banks engaged in a pattern or practice of redlining—denying or avoiding providing credit services to consumers based on racial demographics—in predominantly African-American neighborhoods in and around Cincinnati, Columbus, and Dayton, Ohio, and Indianapolis, Ind. As a result of the settlement with the Department of Justice, Union and Guardian will invest at least $9 million in majority African-American neighborhoods in the affected metropolitan areas. In addition, Union will open two full-service branches and Guardian will open one loan production office to serve the residents of African-American neighborhoods.

DOJ allegations. In its complaint, the DOJ alleges that from at least 2010 through 2014, Union and Guardian served the credit needs of the residents of predominantly white neighborhoods to a significantly greater extent than they served the credit needs of majority African-American neighborhoods. The DOJ claimed the neighborhoods are easily recognized "because each of the four metropolitan areas in which the banks operate has long maintained highly-segregated residential housing patterns for African Americans."

The banks’ practices violated the Fair Housing Act and the Equal Credit Opportunity Act, which prohibit financial institutions from discriminating on the basis of race and color in their mortgage lending practices.

Settlement details. The banks’ $9 million investment includes $7 million in a loan subsidy fund to increase the amount of credit that Union and Guardian extend to residents of majority African-American census tracts. The remaining $2 million will be invested in advertising, outreach, financial education, and community partnership efforts. The settlement also requires both banks to develop robust internal controls to ensure compliance with fair lending obligations and conduct fair lending training for their employees.

"Lenders must treat all potential borrowers equally and fairly," said Principal Deputy Assistant Attorney General Vanita Gupta, head of the DOJ’s Civil Rights Division. "This settlement embodies a win-win solution for all parties by increasing the volume of mortgage loans, driving economic activity and creating a level playing field for qualified borrowers."

Both banks are headquartered in Cincinnati and share common ownership and management.

Companies: Guardian Savings Bank; Union Savings Bank

MainStory: TopStory BankSecrecyAct CommunityDevelopment EnforcementActions EqualCreditOpportunity OhioNews

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