Feds crack down on bank for alleged redlining practices

A Northeast bank has been ordered to pay $27 million to increase fair access to credit in neighborhoods where it allegedly discriminated against black and Hispanic residents.

The Consumer Financial Protection Bureau (CFPB) and the Department of Justice said Hudson City Savings Bank illegally provided unequal access to credit to residents in New York, New Jersey, Connecticut, and Pennsylvania neighborhoods. 

{mosads}CFPB Director Richard Cordray said the practice, which is known as redlining, cut off opportunities for consumers in predominantly black and Hispanic neighborhoods to get a mortgage.

“Without access to affordable credit, neighborhoods deteriorate in the long shadow cast by unfair lending,” he said in a news release. “Today’s action seeks to remove the redline by bringing more than $27 million in mortgage subsidies and outreach programs, along with new bank branches to the communities who should have had access from the beginning.”

If the court approves the proposed consent order, Hudson City will be forced to pay a $5.5 million penalty on top of $25 million in direct loan subsidies to qualified borrowers in the affected communities and $2.25 million to community programs and outreach.

The CFPB alleges that from 2009 to 2013 Hudson City structured its business to avoid and discourage residents in majority black and Hispanic neighborhoods from accessing mortgages. The agency said the bank avoided placing branches and loan officers in those communities and excluded them from marketing strategies and credit assessments.

Hudson City, a federally chartered savings association, has 135 branches and $35.4 billion in assets. The Equal Credit Opportunity Act prohibits creditors from discriminating against applicants in credit transactions on the basis of characteristics such as race, color and national origin.