Dive Brief:

• Exton, Pennsylvania-based Citadel Federal Credit Union has agreed to pay roughly $6.52 million to resolve allegations that it failed to provide mortgage lending services to majority-Black and Hispanic neighborhoods in Philadelphia and several nearby counties between 2017 and 2021, the Justice Department announced Thursday.
• As part of the settlement, Citadel has agreed to open three branches in predominantly Black and Hispanic neighborhoods of Philadelphia and hired a community lending officer in August to oversee lending practices in the city’s communities of color, Citadel said in a press release Thursday.

• The DOJ has reached redlining-related settlements with 13 banks since launching its anti-discrimination initiative in 2021, but Thursday’s agreement marks the first with a credit union. 

Dive Insight:

The Justice Department asserted that Citadel discouraged people of color from seeking credit to obtain home loans, while the credit union’s peer lenders generated mortgage applications and originated mortgage loans at roughly three times Citadel’s rate in predominantly Black and Hispanic neighborhoods.

As part of the settlement, Citadel will provide $6 million in mortgage loan subsidies over five years for majority Black and Hispanic census tracts in Philadelphia County. It has also agreed to put $270,000 toward focused marketing, consumer financial education and outreach and $250,000 in community development partnerships, the credit union said.

Citadel also announced Thursday the appointment of a vice president dedicated to philanthropy and community engagement to bolster its Citadel Cares program, which was unveiled in July 2023.  

“While Citadel respectfully disagrees with the allegations regarding our lending practices, we view this settlement as a vital opportunity to enhance our commitment to proactive community engagement,” the credit union’s CEO, Bill Brown, said in a statement. “We acknowledge that our efforts did not allow us to reach majority Black and Hispanic census tracts in Philadelphia.”

Citadel's situation stems from inaction rather than intentional misconduct, Brown said. The credit union's shift toward digital banking in response to industry trends led to a reduced focus on opening physical branches, particularly in Philadelphia - unintentionally resulting in falling short of its commitment to expand its presence in the city when it expanded its charter.

Assistant Attorney General Kristen Clarke of DOJ’s Civil Rights Division noted Citadel’s status as a credit union, adding that those institutions, too – not just banks – are subject to federal laws that prohibit redlining and lending discrimination.

“Fair and equitable access to financial services is one of the many things that set credit unions apart from banks,” Jim Nussle, CEO of the trade group America’s Credit Unions, said in an emailed statement to Banking Dive. “Citadel Federal Credit Union committed to serve underserved populations in its field of membership and failed to fulfill that commitment. We support the efforts of Citadel’s new leadership to address these shortcomings and to reestablish trust in their communities.”