Dive Brief:
- Washington Trust Company, the oldest community bank in the U.S., has agreed to pay $9 million to settle the allegations of discriminatory mortgage lending practices in majority-Black and Hispanic neighborhoods in Rhode Island from 2016 through at least 2021, the Department of Justice announced Wednesday.
- The DOJ’s complaint alleges that the Westerly, Rhode Island-based lender failed to open locations in predominantly Black or Hispanic neighborhoods when expanding its footprint. Further, the complaint said that other banks received nearly four times as many loan applications every year in the majority-Black and Hispanic neighborhoods for the same six-year period compared to Washington Trust.
- Washington Trust has agreed to open two new branches in majority-Black and Hispanic neighborhoods in Rhode Island and designate at least two mortgage loan officers to serve these communities. It will also hire a director of community lending to oversee the continued growth of lending opportunities in the neighborhoods of color.
Dive Insight:
“This settlement should send a strong message to banks regarding the Justice Department’s firm commitment to combat modern-day redlining and ensure that all lenders are providing equal access to home loan opportunities to communities of color,” Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division said in a statement.
The resolution aims to provide relief to the impacted Black and Hispanic communities, by helping them buy homes, keep their homes or leverage the equity of their homes, Clarke said.
“Ending redlining and providing relief to communities of color impacted by this unlawful practice is a necessary step in ongoing efforts to reduce racial wealth and homeownership gaps across our country,” she added.
Redlining is the discriminatory practice of denying or limiting lending services to specific neighborhoods based on racial or ethnic demographics.
Attorney General Merrick Garland and Clarke launched the DOJ’s Combating Redlining Initiative in October 2021. Since then, the department has retrieved $98 million in relief for communities of color that have been victims of redlining practices.
The complaint claims that Washington Trust relied heavily on loan officers in majority-white areas to generate mortgage applications without trying to reach borrowers of color. Specifically, Washington Trust did not train or incentivize lending staff to market, advertise, or conduct outreach about its mortgage lending services to communities of color, nor did they compensate for their lack of presence in these neighborhoods.
Even when the community bank did receive loan applications from majority-Black and Hispanic neighborhoods, those applicants were disproportionately White borrowers rather than people of color.
Subject to federal court approval, Washington Trust has agreed to implement specific measures under the proposed consent order.
The lender will invest at least $7 million in a loan subsidy fund to expand access to mortgage and home equity lending products for majority-Black and Hispanic neighborhood residents in Rhode Island.
Washington Trust will allocate $1 million for advertising, outreach, financial education and credit counseling targeting neighborhoods of color. Additionally, it will spend $1 million on community partnerships to bolster residential mortgage credit access for those neighborhoods.
Rhode Island has been Washington Trust’s home for 223 years, an official at the bank said, according to Reuters.
“We believe we have been fully compliant with the letter and spirit of fair lending laws, and the agreement will further strengthen our focus on an area that has always been important to us,” Edward O. Handy, the bank’s chairman and chief executive, said in a release.
