WASHINGTON - Attorney General Merrick Garland on Friday launched a new Justice Department initiative aimed at combating discriminatory lending policies among banks, saying the practice harms minority communities and contributes to the racial wealth gap.
In an address to staff, Garland cited the history of banks denying loans to Black borrowers during the Great Depression - a tactic known as redlining - and warned that such practices remain widespread more than 90 years later. He said the department would, in conjunction with other federal agencies, mount the federal government's "most aggressive and coordinated effort" to root out and punish those who violate federal laws that prohibit such practices.
"Our initiative alone will not erase the full legacy of discrimination," Garland said. "But we will spare no resource to ensure that federal fair lending laws are rigorously enforced."
Under the initiative, officials said, Justice's civil rights division will work with U.S. Attorneys' offices across the country, as well as with regulators at the Consumer Financial Protection Bureau and the Treasury Department, to investigate and prosecute banks for biased lending.
To punctuate the message, Justice officials also announced a settlement in a federal redlining case against Trustmark National Bank in Memphis, saying the institution has agreed to invest $3.85 million in a loan subsidy fund and dedicate loan officers as well as open a loan office in a majority Black or Hispanic neighborhood. The bank also will pay a $5 million civil penalty, federal officials said.
Federal authorities said that from 2014 to 2018, Trustmark avoided areas where minorities lived, locating its loan offices in majority White neighborhoods.
The settlement with Trustmark comes after the Justice Department reached agreement in August with Cadence Bank to invest more than $5.5 million to increase credit opportunities for Black and Hispanic borrowers in Houston.
"Redlining is alive and well and has had a lasting negative impact," said Assistant Attorney General Kristen Clarke, who oversees the Justice Department's civil rights division. "Ending redlining is a critical step toward closing the widening gaps of wealth between communities of colors and others. We have a duty to act now."
In a statement, Duane Dewey, Trustmark's president and chief executive, said the bank entered into the settlements with the federal government "to avoid the distraction of protracted litigation and because we share the common goals of breaking down barriers to home financing and exploring innovative ways to help residents of underserved areas achieve the dream of homeownership."
Dewey emphasized that the bank already has implemented new programs to increase services to minority neighborhoods.
Experts have said redlining has contributed to generational inequities as Black families have had more obstacles than White ones to buying a home and being able to pass along that asset to their children. In the first quarter of 2020, for example, 44% of Black families owned their home, compared with 73.7% of White families, according to the Census Bureau.
"Today, a White family is 30 percent more likely to own a home than a Black family," Garland said, emphasizing that the gap is "larger than it was in 1960."
Federal officials said their efforts would not be limited to traditional forms of redlining, but would also address digital forms of unfair lending based on computer algorithms that offer on loan advertisements or underwriting guarantees to certain potential customers, while leaving out other groups.
Those tactics are "often more subtle and difficult to detect, and more resource-intensive to find," said Michael Hsu, the acting comptroller of the currency at the Treasury Department.