BancorpSouth Fined $10.6 Million For Engaging In Redlining Practices

Posted by Patrick Barnard on July 01, 2016 No Comments
Categories : Residential Mortgage

Regional mortgage lender and retail bank BancorpSouth has been fined $10.6 million for allegedly engaging in redlining practices.

According to the U.S. Department of Justice (DOJ), the bank “unlawfully discriminated against African Americans and other residents of predominantly minority communities in the Memphis, Tenn., area, as well as parts of neighboring Mississippi and Arkansas,” as a result of implementing “a policy or practice that required its employees to treat applications differently based on race or other prohibited characteristics.”

The alleged discrimination took place “from at least” 2011 until 2013, the DOJ says in a press release. It occurred partly because the bank had “limited standards in place to ensure that loan officers consistently priced mortgage loans in the same manner or used the same criteria.”

“Such wide flexibility in loan underwriting and pricing resulted in the bank’s denying African-American applicants for mortgage loans at significantly higher rates than white applicants with similar credit profiles,” the DOJ says in its release.

These limited standards also “resulted in the bank charging African-American borrowers higher interest rates than similarly situated white borrowers.”

Authorities also allege that the bank had a “policy or practice of requiring its employees to deny applications from minorities more quickly than similarly situated white applicants and to not provide credit assistance to ‘borderline’ applicants that other applicants may have received.”

During an investigation into the bank’s activities, authorities gained access to an audio recording in which bank officials discuss a policy of denying applications from minorities within 21 days. In the recording, BancorpSouth employees can be heard making several racially insensitive comments, followed by laughter, the DOJ claims.

In 2013, the Consumer Financial Protection Bureau used African-American “testers” to determine whether any discrimination was taking place. The results indicated that loan officers were treating minority applicants “less favorably than similarly situated white testers,” the DOJ says.

As per the settlement, BancorpSouth will pay nearly $7 million in relief for impacted individuals and neighborhoods; invest at least $800,000 in advertising, outreach and community partnership efforts; and pay a $3 million civil penalty and amend its policies, standards and training to ensure compliance with fair lending obligations.

Authorities say the policies the bank had in place were in violation of the Fair Housing Act and Equal Credit Opportunity Act.

In a statement, BancorpSouth says it has already addressed the discriminatory practices and recently hired an executive to do outreach in minority and other neighborhoods.

“BancorpSouth is dedicated to a culture of respect, diversity and inclusion in both our workplace and communities,” says James Rollins, chairman and CEO of BancorpSouth, in the statement. “We have a long-standing commitment to equal treatment, and any form of discrimination will not be tolerated.”

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