BancorpSouth, a Tupelo, Miss.-based regional bank, has agreed to pay $10.6 million to resolve charges brought by the Consumer Financial Protection Bureau (CFPB) and the Department of Justice (DOJ) that it practiced discriminatory mortgage lending practices against African-Americans in the Memphis metro area between 2011 and 2013.
According to the charges brought by the federal agencies, BancorpSouth engaged in redlining procedures designed to discourage nonwhite applicants from seeking home loans, including the placement of branches outside of minority neighborhoods and excluding predominantly nonwhite communities from its Community Reinvestment Act coverage area. BancorpSouth is also accused in discrimination in the underwriting and loan pricing process and in encouraging a higher denial rate of applications from non-whites.
As part of its investigation, the CFPB used white and black testers to determine that redlining was taking place. This is the first confirmed use by the CFPB of this form of testing, also known as “mystery shopping.”
“We believe this settlement is a positive development for the Bank, and is in the best long-term interest of our customers, employees, and shareholders,” said James D. Rollins III, chairman and CEO of BancorpSouth. “BancorpSouth is fully committed to fair and responsible lending practices in all communities throughout our footprint. Our settlement is a testament to that commitment. We will continue to focus on what we do best—serving the needs of all our customers where they live and work. In agreeing to the Consent Order, the Bank has not admitted to any of these allegations or to any liability.”
As part of the settlement, BancorpSouth will pay a $3 million penalty to the CFPB’s Civil Penalty Fund and will offer $4 million in direct loan subsidies in minority neighborhoods in Memphis, $2.78 million to African-American consumers who were unlawfully denied or overcharged for loans and $800,000 for community programs, financial counseling and advertising to the communities impacted by the redlining.
“When banks discriminate on the basis of race, they violate our civil rights laws and threaten the foundation of a fair economy,” said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department’s Civil Rights Division. “The Civil Rights Division will continue to enforce our nation’s fair lending laws to ensure that qualified applicants and borrowers can access credit and invest in their financial future without facing unlawful barriers.”