On September 27, a settlement agreement was announced following allegations against a Rhode Island-based community bank for engaging in a pattern of lending discrimination known as “redlining”. The case, brought forward by the Department of Justice (DOJ), resulted in a $9 million settlement.
The community bank faced claims of discriminatory behavior, particularly “redlining”, a discriminatory practice where communities, typically those inhabited by minority groups, are denied services or granted them at a higher rate. The term originated from the lines drawn on maps by Home Owners’ Loan Corporation (HOLC) in the 1930s to delineate which neighborhoods were considered risky for housing loans. Despite being outlawed by the Fair Housing Act in 1968, incidents of redlining still appear in contemporary cases.
The DOJ’s legal action underscores the ongoing vigilance of regulators with respect to such discriminatory practices. It serves as a reminder to financial institutions to ensure their lending practices are compliant with relevant legislation, in this case the Fair Housing Act.
Details of the settlement have not been fully disclosed in the public domain. It is understood that the settlement sum of $9 million will be used to compensate aggrieved parties and potentially fund credit and financing programs that promote fair lending to the affected communities in Rhode Island.
To read more detailed information on this case, click here.
This case comes as a reminder to corporations around the world, highlighting the importance of adhering to set legal standards and practices. Legal practitioners should take a proactive role in ensuring their company policies offer no leeway for such discriminatory actions moving forward.