CFPB, Justice Dept. slap bank with millions in fines over alleged discrimination

by Ryan Smith30 Jun 2016
The Consumer Financial Protection Bureau and the Justice Department want a Mississippi-based bank to pay millions in fines over alleged discrimination.

The CFPB and the DOJ filed a complaint Wednesday alleging that BancorpSouth has engaged in “redlining,” a practice where people living in certain areas are not given the same access to credit as other people, usually on the basis of race. The practice has been illegal for decades, but still goes on today.

According to the CFPB and the DOJ, BancorpSouth illegally denied access to credit to residents in minority neighborhoods in Memphis. “These actions discouraged prospective borrowers in minority communities from applying for credit,” the CFPB said in a release.

The complaint also alleges that the bank illegally denied African American applicants some types of mortgage loan and overcharged some of its African American customers. The bank allegedly also required its employees to review applications from minority borrowers more quickly than others and deny them the opportunity to receive credit assistance that might have improved their chances of getting a loan.

The CFPB said in its release that it sent “undercover testers” to several BancorpSouth branches to ask about getting a mortgage loan. The investigation found that bank employees treated African American testers worse than white testers with similar credit qualifications.

“For example, Bank employees provided information that would have restricted African American testers to smaller loans than white testers,” the CFPB alleged.

If approved by the court, the CFPB and DOJ consent order would require the bank to revise its policies and provide fair-lending training to its employees. It would also require the bank to:
  • Pay $4 million to subsidize mortgages in Memphis-area minority neighborhoods that were allegedly redlined
  • Invest $500,000 to partner with community organizations that provide education, credit repair and other assistance in minority neighborhoods
  • Spend $100,000 per year for a certain term on advertising in minority neighborhoods in the Memphis area
  • Pay $2.8 million to African American consumers who were unlawfully denied loans or were overcharged
  • Offer subsidized credit to African American borrowers who were wrongfully denied loans
  • Pay a penalty of $3.03 million
  • Open a new branch in a minority neighborhood in the Memphis area


Is TILA-RESPA a good or bad thing long term?