Washington – The Justice Department announced on Friday an intergovernmental effort to investigate and prosecute redlining, the practice of banks that discriminate against racial minorities or certain neighborhoods. This is the first major expansion in redlining investigations since the Obama administration.

As part of that effort, the Department of Justice along with the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency also announced a new case against Trustmark Bank for its treatment of black and Hispanic borrowers in Memphis, Tennessee.

Despite half a century of laws designed to combat redlining, the racist practice continues across the country and the long-term effects are still being felt to this day. The average net worth of a black family is a fraction of a typical white household, and homes found in neighborhoods historically marked in red are always worth less than homes found in communities not marked in red.

“Lending discrimination goes against the fundamental promises of our economic system,” Attorney General Merrick Garland said in prepared remarks. “When people are denied credit simply because of their race or national origin, their ability to participate in the prosperity of our country is virtually wiped out. “

Garland said the department is currently investigating several cases of redlining and expects it to open more in the coming months.

“We will spare no resources to ensure that federal fair loan laws are strictly enforced and that financial institutions provide every American with an equal opportunity to obtain credit,” Garland said.

The Justice Department’s effort also includes the CFPB and OCC, two of the country’s financial regulators who are often most involved in mortgage lending. It will also involve US law firms with local experience in these neighborhoods as well as state attorneys general.

The department will also expand its analysis of bank lending activities to research typical behaviors.

“It is an endemic problem that requires all hands on deck,” CFPB director Rohit Chopra said on Friday.

While there are still cases of historic redlining – where banks are excluding certain neighborhoods – the Biden administration is focusing a significant portion of this effort on modern redlining, which can often come from the algorithms and software that banks use to decide. whether or not to approve a loan. .

CFPB will focus much of its efforts on algorithmic redlining, says Chopra

“Digital redlining can simply entrench ancient forms of discrimination. “

The Trump administration has largely sidelined federal efforts to investigate cases of redlining. The Trump administration introduced its first case of redlining in 2018 – nearly two years after the administration began in office – and largely dismantled the civil rights division led by Vanita Gupta, who under the administration Obama, had tried to expand the redlining investigations.

The Justice Department, CFPB and OCC struck a deal against Trustmark National Bank on Friday that would end allegations the bank criticized parts of Memphis.

Trustmark, a predominantly southern bank with $ 13 billion in assets, will have to open a mortgage office in a predominantly black and Hispanic neighborhood in the Memphis metropolitan area and contribute $ 3.85 million to a fund for create loan grants for borrowers from disadvantaged neighborhoods. The agreement provides for a payment of $ 4 million to the OCC and a payment of $ 1 million to the CFPB, for a total of $ 5 million.

Trustmark chairman and chief executive Duane Dewey said in a statement that the bank had fully cooperated with the DOJ’s investigation to “avoid distraction from protracted litigation.” The discriminatory acts occurred between at least 2014 and 2016, and the bank has worked to address these practices, he said.

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