City National Bank to pay $31 million settlement for racist mortgage-related practices in LA

Jan 12, 2023 | Political News

The United States Department of Justice has accused Los Angeles-based City National Bank of discrimination after being found systematically refusing to give out mortgages to racial and ethnic minorities by avoiding predominately black and Latino communities.

The discriminatory practice, known as redlining, has led to the bank being required to pay more than $31 million, the largest redlining settlement in US history, according to the Associated Press.

The Justice Department states that between 2017 and 2020, City National avoided doing mortgage-related business in majority black and Latino neighborhoods in Los Angeles County, while other banks operating in the same neighborhoods allegedly received six-times the number of mortgage applications.

City National was allegedly so reluctant to operate in neighborhoods where the majority of residents were people of color, they only opened one branch in the space of 20 years, compared to majority-white neighborhoods that saw 11 branches opened or acquired in the same period of time.

The Justice Department also alleged that one branch in a majority black and Latino neighborhood did not have a dedicated mortgage underwriter on site, unlike the other 11 branches, which all had an employee dedicated to mortgages.

“This settlement should send a strong message to the financial industry that we expect lenders to serve all members of the community and that they will be held accountable when they fail to do so,” Assistant Attorney General Kristen Clarke, who leads the Justice Department’s civil rights division, said in a statement.

The Justice Department under Attorney General Merrick Garland has been prioritizing civil rights prosecutions, and the Biden Administration has also been prioritizing redlining cases, more so than any previous administration.

A task force set up by the Biden Administration to deal with the problem includes bank regulators like the Comptroller of the Currency and the Consumer Financial Protection Bureau, as well as the Justice Department, and focuses not only on explicit redlining but also on discriminatory computer algorithms that result in redlining. 

Part of City National's settlement stipulates that the bank create a $29.5 million loan subsidy fund specifically for black and Latino borrowers, as well as spend $1.75 million on community outreach and financial education programs to specifically reach minority borrowers.

City National has allegedly been highly cooperative with the Justice Department's redlining investigation.