CFPB and DOJ Announce Joint Action Against Hudson City Savings Bank, F.S.B.
On September 24, 2015, the Consumer Financial Protection Bureau (CFPB) and the Department of Justice (DOJ) announced a joint action against Hudson City Savings Bank, F.S.B. (Hudson).
The complaint alleges that Hudson engaged in discriminatory “redlining” practices that denied residents in predominantly black and Hispanic neighborhoods fair access to mortgage loans in violation of the Equal Credit Opportunity Act and Fair Housing Act. Specifically, Hudson is accused of illegally avoiding and thereby discouraging consumers in predominantly black and Hispanic neighborhoods from applying for credit by
- locating bank branches and loan officers outside of predominantly black and Hispanic neighborhoods;
- generating approximately 80 percent of its mortgage applications from mortgage brokers who were primarily located outside of black and Hispanic neighborhoods;
- directing its limited marketing efforts in neighborhoods with few black and Hispanic residents; and
- excluding predominantly black and Hispanic communities from its credit assessment areas, which Hudson was required to select pursuant to the Community Reinvestment Act.
Simultaneously with filing the complaint against Hudson, the parties submitted a proposed consent order that, if accepted by the court, would require Hudson to
pay $25 million in loan subsidy programs to increase access to affordable credit for residents in the affected neighborhoods of New Jersey, New York, Connecticut, and Pennsylvania;
- spend $200,000 annually for five years on a targeted advertising and outreach campaign to generate mortgage loan applications from qualified residents in the affected black and Hispanic neighborhoods;
- spend $750,000 to partner with community-based or governmental organizations that provide assistance to predominantly black and Hispanic communities;
- open two full-service bank branches within predominantly black and Hispanic neighborhoods;
- expand its assessment area under the Community Reinvestment Act to include certain counties in New York and the cities of Camden, New Jersey, and Philadelphia, Pennsylvania;
- complete an assessment of the credit needs of the predominantly black and Hispanic communities within the affected areas and consider how it's lending operations can be expanded to meet the needs of such communities;
- develop and submit a compliance plan that includes a review of mortgage lending policies and practices and steps for reducing redlining risk; and
pay a $5.5 million civil penalty.
The CFPB described the parties' proposed consent order as “the largest federal court settlement for redlining in history as measured by loan subsidies provided to consumers.”
You can view the complaint against Hudson here: http://files.consumerfinance.gov/f/201509_cfpb_hudson-city-joint-complaint.pdf
You can view the parties’ proposed consent order here: http://files.consumerfinance.gov/f/201509_cfpb_hudson-city-consent-order.pdf
For more information on this subject, contact Zane Gilmer, a member of the firm’s litigation practice group, or contact your usual Stinson Leonard Street attorney.