Dive Brief:
- New Jersey-based Lakeland Bank agreed to pay more than $13 million Wednesday to settle Justice Department allegations that it engaged in redlining, or refusing mortgage lending services to nonwhite borrowers, in the Newark metropolitan area.
- Lakeland, among other things, must invest $12 million in a loan fund for residents of Black and Hispanic neighborhoods; spend $750,000 on advertising, outreach and consumer education; and dole out $400,000 to develop community partnerships that offer services to increase access to residential mortgage credit in minority communities.
- Lakeland executives “strongly disagree with any suggestion [the bank has] acted improperly,” CEO Tom Shara said, adding the settlement “avoids the distraction of protracted litigation” and allows the bank to focus on “meeting the credit needs of all residents within our communities, including those who historically have been underserved.”
Dive Insight:
Lakeland failed to provide mortgage lending services to Black and Hispanic neighborhoods in and around Newark between 2015 to 2021, the DOJ alleged in a complaint filed Wednesday in federal court. The complaint further alleged all of Lakeland’s branches were in majority-White neighborhoods.
As part of the settlement, Lakeland must open two new branches in majority-nonwhite neighborhoods, including one in Newark, and must dedicate at least four mortgage loan offers to serving neighborhoods in and around Brick City. Lakeland must also employ a full-time community development officer to oversee lending in majority-nonwhite neighborhoods. And it must maintain an expanded Community Reinvestment Act assessment area in Essex, Somerset and Union counties.
The settlement comes just one day after Provident Bank, another New Jersey institution, said it would acquire Lakeland in a $1.3 billion all-stock transaction.
Provident disclosed Tuesday that it was aware of the pending settlement and fully considered it when agreeing to the merger.
The DOJ, meanwhile, has refocused its efforts to combat redlining, launching an initiative last October alongside the Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC) and striking $38 million in settlements with financial institutions it alleged had discriminated. Berkshire Hathaway-owned Trident Mortgage Co. agreed to pay more than $20 million in a July settlement with the DOJ. Mississippi-based Trustmark Bank settled in October 2021, at a penalty of more than $5 million.
“Ending redlining is a critical step in our work to close the widening gaps in wealth between communities of color and others,” Kristen Clarke, assistant attorney general in the DOJ’s Civil Rights Division, said in a statement. “This settlement demonstrates our firm commitment to combating modern-day redlining and holding banks and other lenders accountable when they deny people of color equal access to lending opportunities. Through this agreement, we are sending a strong message to the financial industry that we will not stand for discriminatory and unlawful barriers in residential mortgage lending.”
