The Justice Department announces a renegotiation of a $31 million settlement agreement with Los Angeles-based City National Bank.

NEW YORK. The Justice Department on Thursday accused Los Angeles-based City National Bank of discrimination by refusing to guarantee mortgages in predominantly black and Hispanic communities, demanding more than $31 million from the bank in the largest settlement in the department’s history.

City National has become the latest bank in recent years to systematically avoid lending to racial and ethnic minorities, a practice the Biden administration has created its own task force to combat.

The Justice Department says that between 2017 and 2020, City National avoided marketing and issuing mortgages in black and Hispanic-majority areas of Los Angeles County. Other banks operating in these areas received six times as many mortgage applications as City National, federal officials said.

The Justice Department says City National, a bank with about $95 billion in assets, has been so reluctant to operate in areas where most residents are of color that the bank has opened only one branch in those areas in the past 20 years. For comparison, during this period the bank opened or acquired 11 branches. Also, not a single employee handled mortgages in this one branch, unlike branches in most white neighborhoods.

“This settlement should send a signal to the financial industry that we expect lenders to serve all members of the community and that they will be held accountable if they don’t,” said Assistant Attorney General Kristen Clark, who heads the Department’s Civil Division. justice. Department of Rights,” the statement said.

Attorney General Merrick Garland has prioritized civil rights prosecutions since taking over the Justice Department in 2021, and the department in the Biden administration has placed a stronger focus on case review than in previous administrations.

Biden’s task force includes the Department of Justice as well as banking regulators such as the Comptroller of the Currency and the Consumer Financial Protection Bureau, and focuses not only on overt forms of redlining but also on cases where computer algorithms can lead to bank discrimination against black and Hispanic borrowers.

Despite half a century of anti-redline laws, racist practices continue across the country, and their long-term effects are being felt to this day. The median net worth of a black family is a small fraction of a typical white household, and homes in historically redlined areas continue to cost less than homes in non-redlined communities.

As part of the settlement, City National will create a $29.5 million loan subsidy fund for loans to black and Hispanic borrowers and spend $1.75 million on advertising, community outreach, and financial education programs for minority borrowers.

City National said in a statement that it disagreed with the Justice Department’s claims, but “still supports the Justice Department in its efforts to ensure equal access to credit for all consumers, regardless of race.”

The Justice Department said City National has cooperated on the redline investigation and is working to resolve its issues in other markets as well.

Clarke announced the settlement Thursday morning at the historic Black Baptist Church in South Los Angeles, which was an important force in the civil rights movement and hosted speeches by the Reverend Martin Luther King Jr., Malcolm X and others.

The settlement with City National is the largest settlement with the Department of Justice. In an agreement with the Department of Housing and Urban Development with the Associated Bank in 2015, the bank committed to provide $200 million in loan enhancements to minority areas, as well as a $10 million subsidy fund similar to the fund. approved by City National. .

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