Rhode Island-based chartered bank Washington Trust Company has agreed to pay $9 million to settle a redlining case with the U.S. Department of Justice (DOJ), the parties announced Wednesday. The agreement requires court approval.
Washington Trust, known as the oldest U.S. community bank, was accused of illegally avoiding providing mortgage services to majority Black and Hispanic neighborhoods in Rhode Island. However, the bank denies the allegations.
“This resolution will provide critical relief to impacted Black and Hispanic communities, enabling them to buy a home, keep their home or access the equity in their home,” Kristen Clarke, assistant attorney general of the Justice Department’s civil rights division, said in a statement.
In this case, the alleged redlining occurred from 2016 through at least 2021, when the bank failed to open a branch in majority-Black and Hispanic neighborhoods. The DOJ alleges that the bank also failed to train and incentivize its staff to market and advertise its mortgage services to compensate for its lack of presence in these areas.
Ultimately, other banks received four times more loan applications each year in these minority neighborhoods than Washington Trust. And, even when the bank received applications in these areas, potential homebuyers were disproportionately White, the DOJ claims.
In a statement, the bank “vehemently” denied the allegations and said it agreed with the settlement solely to avoid the expense and distraction of potential litigation.
“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. “Ned” Handy III, Washington Trust chairman and CEO, said in a statement.
According to the agreement, Washington Trust will invest at least $7 million in a loan subsidy fund to increase access to mortgage and home equity products. It will also spend $1 million in partnerships and $1 million in advertising. The settlement does not include any civil monetary penalties.
Washington Trust committed to opening two new branches in majority-Black and Hispanic neighborhoods in Rhode Island, with at least two mortgage loan officers. A director of community lending will oversee the business in communities of color.
Redlining has been on the DOJ’s radar since October 2021, when an Initiative to combat the problem was launched. Since then, the DOJ has reached $98 million in settlements in nine cases regarding the topic.
It includes cases such as American Bank of Oklahoma, ESSA Bank, Park National Bank, City National Bank, Lakeland Bank and Trident Mortgage Co.
Source: housingwire.com