US bank fined for discriminating against minority groups

THE US Department of Justice and the Consumer Financial Protection Bureau fined Mississippi-based BancorpSouth US$10.6 million, alleging the bank deliberately discriminated against minorities in its lending practices.

BancorpSouth, a regional bank with $13.9 billion in assets and 239 branches, deliberately avoided building branches in minority neighbourhoods in Memphis, Tennessee from at least 2011 to 2013.

The bank also denied more loans to African Americans and other minorities when compared with neighbourhoods with smaller minority populations, the Justice Department and CFPB said on Thursday, and minorities who were approved for loans were given higher interest rates when compared with non-minorities.

While BancorpSouth is based in Tupelo, Mississippi, the case deals with BancorpSouth’s presence in Memphis and stems from a 2014 investigation into the bank by the Justice Department and CFPB.

The bank had 22 branches in the Memphis area between 2011 and 2013, all of which were located outside neighbourhoods with large minority populations. Maps provided by the regulators also showed nearly all BancorpSouth’s loans originated outside minority neighbourhoods of Memphis as well.

“BancorpSouth’s discrimination throughout the mortgage lending process harmed the people who were overcharged or denied their dream of home ownership based on their race, and it harmed the Memphis minority neighbourhoods that were redlined and denied equal access to affordable credit,” said CFPB director Richard Cordray in prepared remarks.

BancorpSouth during this period required its employees to treat applications based upon a potential borrower’s race, colour and national origin, according to the complaint filed in the case. Minority applicants were to be denied loans more quickly than white applicants, and minority applicants who were considered borderline for approval were denied based on race.

In a stark example of the discriminatory culture at BancorpSouth at the time, bank employees were audio-taped using racial epithets, followed by laughter, when discussing the possibility of hiring of an AfricanAmerican employee, according to the documents released by Justice Department and CFPB.

The US banking industry has such a long documented history of discriminating against minorities who want to borrow that there’s a term to describe it: redlining.

The term stems from a time when banks would outline minority neighbourhoods in red marker as places where loans were to be denied. The practice cut off entire neighbourhoods to capital, and many housing experts blame redlining for why large minority neighbourhoods decayed and slipped into poverty in the second half of the 20th Century.

Even decades after the civil rights movement, banks are still regularly caught in redlining cases. The most recent example came in September 2015, when Hudson City Savings Bank agreed to pay $27 million to settle redlining allegations stemming from its operations in New York, New Jersey, Connecticut and Pennsylvania. Three months before Hudson City Savings, Wisconsin-based Associated Bank agreed to finance $200 million in mortgages to minority populations to settle its redlining allegations.

If approved by the court, BancorpSouth will provide $4 million in direct loan subsidies in minority neighbourhoods in Memphis, spend at least $800,000 on community programs and minority outreach, $2.78 million to African American customers who were overcharged or denied loans and a $3 million penalty.

BancorpSouth has agreed to settle all claims against it, without admitting guilt, and says it had already addressed the discriminatory practices and recently hired an executive to do outreach.

“BancorpSouth is dedicated to a culture of respect, diversity and inclusion in both our workplace and communities,” said BancorpSouth chairman and CEO James Rollins said: “We have a longstanding commitment to equal treatment and discrimination will not be tolerated.”