The Department of Justice today announced an agreement to resolve allegations that City National Bank (City National) engaged in a pattern or practice of “red lining” credit discrimination in Los Angeles County. City National is the largest bank headquartered in Los Angeles and is among the 50 largest banks in the United States. This resolution will include more than $31 million in aid for affected individuals and communities. The settlement, which is part of the Department’s nationwide Red Lining Initiative launched by Attorney General Merrick B. Garland in October 2021, represents the largest red lining settlement in its history.
“Fifteen months after I promised that the Department of Justice would aggressively step up our efforts to combat discriminatory practices in the housing market, today we have obtained the largest red-line settlement in the history of the Department,” said Attorney General Merrick. B. Garland. “So far, the Red Line Initiative has secured more than $75 million in relief for communities that have experienced lending discrimination. The Justice Department will continue to strengthen our efforts to vigorously enforce federal fair lending laws and will work to ensure that financial institutions provide an equal opportunity for all Americans to obtain credit. Before what would have been the 94th birthday of Dr. Martin Luther King Jr., the time is right to reaffirm our commitment to that work and to the pursuit of justice for all Americans.”
“This settlement is historic, marking the largest settlement ever obtained by the Department of Justice against a bank involved in an illegal redlining,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “This agreement represents Dr. Martin Luther King Jr.’s commitment to fight economic injustice and ensure that African-Americans and all communities of color can access the American dream and freely access the credit they need to buy a home. Redlining is a practice from a bygone era, goes against the principles of fairness and justice, and has no place in our current economy. This agreement should send a strong message to the financial industry that we expect lenders to serve all members of the community and that they will be held accountable when they fail to do so.”
“In the words of Dr. Martin Luther King Jr., the issue of fair housing is a ‘moral issue.’ Therefore, ending the redlining is a critical step in closing the widening gaps in homeownership and wealth, especially in a city as large and diverse as Los Angeles,” said U.S. Attorney Martin Estrada for the Central District of California. “It is unacceptable that red lining persists into the 21st century, and this case demonstrates our commitment to combat red lining and hold banks and others accountable when they engage in unlawful discrimination. Through this settlement, we are taking a big step forward by removing illegal and discriminatory barriers to residential mortgage lending and meeting the credit needs in Los Angeles.”
“Red lining” is an illegal practice in which lenders avoid providing credit services to people who live in communities of color because of the race, color, or national origin of the residents of those communities. The lawsuit filed today in federal court alleges that from 2017 through at least 2020, City National avoided providing mortgage loan services to majority Black and Hispanic neighborhoods in Los Angeles County and discouraged residents of these neighborhoods from obtaining mortgage loans. The lawsuit also alleges that during that period other banks received more than six times as many applications in majority Black and Hispanic neighborhoods in Los Angeles County than City National each year. Additionally, City National has only opened one branch in a majority Black and Hispanic neighborhood in the last 20 years, despite having opened or acquired 11 branches during that period. And unlike its branches in majority-white areas, City National did not assign any employees to generate home loan applications at that branch.
Under the proposed consent order, which is subject to court approval and was filed today in the US District Court for the Central District of California along with a lawsuit, City National Bank has agreed to do the following:
- Invest at least $29.5 million in a loan subsidy fund for residents of majority Black and Hispanic neighborhoods in Los Angeles County; at least $500,000 for advertising and outreach to residents of these neighborhoods; at least $500,000 for a consumer financial education program to help increase access to credit for residents; and at least $750,000 for the development of community associations to provide services that increase access to residential mortgage credit.
- Opening a new branch in a majority Black and Hispanic neighborhood and evaluating future expansion opportunities within Los Angeles County; ensure that at least four mortgage loan officers are dedicated to serving majority black and Hispanic neighborhoods; and employ a full-time Community Loan Manager who will oversee the ongoing development of loans in majority Black and Hispanic neighborhoods.
- Conduct a community credit needs assessment, a research-based market study, to help identify financial service needs for majority Black and Hispanic census tracts within Los Angeles County.
City National collaborated with the Department to remedy the underline allegations. In conjunction with this agreement, City National has announced that it is taking proactive steps to expand its lending services into other markets across the country to provide greater access to credit in communities of color. Specifically, City National is working to facilitate additional homeownership opportunities in underserved communities, including by creating a special purpose lending program for residential mortgages to cover geographic areas in various locations across the country, including New York, Georgia, Nevada and Tennessee. Additionally, City National plans to launch a small business loan program that will aim to help underserved business owners operate and grow their business.
In October 2021, Attorney General Garland launched the Justice Department’s Red Line Fighting Initiative, a coordinated enforcement effort to address this persistent form of discrimination against communities of color. The initiative is expanding the Department’s reach by strengthening partnerships with US Attorneys’ Offices across the country, regulatory partners, and their partners in state Attorneys General’s offices. Since the initiative was launched, the Department has announced five cases and review settlements with a combined relief of $75 million for communities that have been victims of credit discrimination, including a $20 million settlement with Trident Mortgage Company and a settlement of $13 million with Lakeland Bank. .
Additional information on the fair foreclosure of section loans can be found at www.justice.gov/fairhousing. Individuals can report lending discrimination by calling the Department of Justice’s housing discrimination tip line at 1-833-591-0291, or by filing a report online.