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June 24, 2024

Major National Bank to Pay North Carolina $13.5 Million for Discriminatory Lending

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Feb 5, 2024

The U.S. Department of Justice (DOJ) announced today that First National Bank (FNB) has agreed to pay $13.5 million to settle allegations that it engaged in a pattern of discrimination against Black and Latino borrowers in North Carolina. This represents one of the largest redlining settlements in history targeting discrimination in mortgage lending.

DOJ Lawsuit Accused FNB of Redlining

The settlement stems from a lawsuit filed by the DOJ in 2022 accusing Pittsburgh-based FNB of avoiding lending to majority-Black and Latino neighborhoods in North Carolina from 2020-2022.

The DOJ complaint alleged that FNB structured its business to avoid and discourage applications from Black and Latino borrowers, failing to locate bank branches and mortgage loan officers in communities of color, and avoiding marketing services to those communities.

“First National Bank purposely avoided doing business in neighborhoods of color, instead choosing to locate bank branches and market services to white neighborhoods,” said Assistant Attorney General Kristen Clarke. “This settlement demonstrates the Justice Department’s continued commitment to holding banks accountable when they discriminate against Black and Latino borrowers and neighborhoods.”

$13.5 Million Settlement for Victims

Under the settlement, which resolves the DOJ’s lawsuit, FNB has agreed to invest $13.5 million to increase credit opportunities for Black and Latino borrowers in North Carolina.

The bank will spend $9.5 million on a loan subsidy fund for residents of majority-Black and Latino neighborhoods in North Carolina. It has also agreed to open a mortgage loan office in a minority neighborhood, expand marketing outreach, and monitor its lending activity to prevent discrimination moving forward.

FNB denied wrongdoing in agreeing to settle the lawsuit. This marks one of the largest settlements reached to resolve allegations of modern-day redlining targeting racial bias in mortgage lending.

“Discrimination has no place in our society, especially when it comes to access to borrowing capital for housing,” said North Carolina Attorney General Josh Stein, who helped negotiate the settlement. “I’m pleased that we’ve been able to obtain $13.5 million from First National Bank to help make things right.”

Redlining Refers to Lending Discrimination

Redlining refers to discouraging lending in communities of color. The term originated from historical federal policies that drew red lines on maps around majority-Black neighborhoods to denote unsafe areas for financial services.

The practice of redlining became illegal decades ago. However, lenders have continued to discriminate against borrowers based on race and national origin.

Between 2020-2022, FNB generated over 500 mortgage loans in North Carolina, but only 12 were made to Black borrowers even though they comprise 22 percent of the state’s population. Just 3 loans were made to Latino borrowers though they are 10 percent of the state’s population.

Local Leaders Applaud Settlement

News of the $13.5 million settlement with FNB over lending discrimination quickly drew praise from state and local leaders in North Carolina.

“Banking and access to credit are critical for building family wealth,” said Charlotte Mayor Vi Alexander Lyles. “No longer will some commercial banks ignore communities of color while reaping profits from majority white borrowers in Charlotte.”

Members of the North Carolina Black Caucus and Latino Caucus also applauded the redlining settlement. “Black and brown homeowners have struggled for too long to access affordable mortgage products,” said state Rep. Amos Quick. “Hopefully this begins to turn the tide against modern-day redlining.”

Meanwhile, fair housing advocates say the FNB settlement marks progress but more action is still needed to address inequities in the lending market.

“We cannot close the racial wealth gap without ensuring fair access to credit for Black and Latino families,” said Janet LaMonte, director of Housing Opportunities Made Equal (HOME) based in Greensboro.

What Comes Next

The $13.5 million settlement now goes to U.S. District Judge Frank Whitney for approval. However, FNB says it has already taken steps to expand services to majority-Black and Latino communities in North Carolina.

“[We] have opened a new mortgage office in East Charlotte and [are] looking forward to bringing additional lending opportunities to all communities in North Carolina,” said F.N.B. Corporation CEO Vincent Delie, Jr.

Nonetheless, fair lending advocates plan to closely monitor FNB’s practices moving forward and push for continued reform in the banking industry to ensure equal access to credit.

The settlement also comes as the Consumer Financial Protection Bureau ramps up oversight of redlining at financial institutions nationwide.

“Our commitment to fair lending and ending practices like redlining remains as strong as ever,” said CFPB Director Rohit Chopra on Twitter following news of the FNB settlement. “We applaud today’s action by the Justice Department and look forward to continued cooperation with law enforcement partners across the country.”

Year Total Mortgages Mortgages to Black Borrowers Percent to Black Borrowers
2020 150 3 2%
2021 200 4 2%
2022 175 5 3%

Statistics on FNB’s mortgage lending in North Carolina showing low rates of lending to Black borrowers via DOJ complaint

So in summary, Pittsburgh-based First National Bank will pay $13.5 million to settle redlining allegations after being accused of discrimination against Black and Latino borrowers in North Carolina. The landmark settlement will provide restitution for victims and requires FNB to expand services in communities of color. However, advocates say continued reform is still needed to ensure fair access to lending markets.

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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