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City National Bank To Pay $31M To Settle Redlining Claims

Jan 16, 2023
The U.S. Supreme Court declined to hear an appeal brought by Nomura Holdings Inc. and the Royal Bank of Scotland Group PLC
Staff Writer

DOJ says settlement with LA-based bank is largest in department's history.

KEY TAKEAWAYS
  • City National is the largest bank headquartered in Los Angeles and among the 50 largest U.S. banks.
  • From 2017 through at least 2020, City National avoided marketing and underwriting mortgages in majority-Black and Hispanic neighborhoods.
  • Other banks in the county received more than six times as many applications in majority-Black and Hispanic neighborhoods.
  • City National opened only one branch in a majority-Black and Hispanic neighborhood in the past 20 years.

The U.S. Department of Justice (DOJ) last week announced the largest redlining settlement in its history, requiring Los Angeles-based City National Bank to pay $31 million over accusations it refused to underwrite mortgages in predominantly Black and Latino communities.

City National is the largest bank headquartered in Los Angeles and among the 50 largest banks in the United States. It’s the latest bank in the last several years to be accused by the DOJ of systematically avoiding lending to racial and ethnic minorities.

“This settlement is historic, marking the largest settlement ever secured by the Justice Department against a bank engaged in unlawful redlining,” said Assistant Attorney General Kristen Clarke of the DOJ's Civil Rights Division. “This settlement embodies Dr. Martin Luther King Jr.’s commitment to fighting economic injustice and ensuring that Black Americans and all communities of color are able to access the American dream and freely access the credit needed to purchase a home.”

The complaint filed in federal court alleges that from 2017 through at least 2020, City National avoided marketing and underwriting mortgages in majority-Black and Hispanic neighborhoods in Los Angeles County and discouraged residents in these neighborhoods from obtaining mortgage loans. During that time period, other banks in the county received more than six times as many applications in majority-Black and Hispanic neighborhoods as City National each year.

According to the complaint, City National opened only one branch in a majority-Black and Hispanic neighborhood in the past 20 years, despite having opened or acquired 11 branches during that time. And unlike at its branches in majority-white areas, City National did not assign any employee to generate mortgage loan applications in that branch.

Dr. Martin Luther King Jr. Day is intended as a day of reflection and celebration for the civil rights movement, but the settlement suggests the country, and particularly the financial industry, have not made enough progress, officials said.

“It is unacceptable that redlining persists into the 21st century, and this case demonstrates our commitment to combat redlining and hold banks and others accountable when they engage in unlawful discrimination,” said U.S. Attorney Martin Estrada for the Central District of California. “Through this agreement, we are taking a major step forward by removing unlawful and discriminatory barriers in residential mortgage lending, and meeting the credit needs in Los Angeles.”

In a statement, City National said it disagreed with the Justice Department’s allegations, but that it will “nonetheless support the DOJ in its efforts to ensure equal access to credit for all consumers, regardless of race.”

Under the consent order, which is subject to court approval, City National Bank agrees to do the following:

  • Invest at least $29.5 million in a loan subsidy fund for residents of majority-Black and Hispanic neighborhoods in Los Angeles County; at least $500,000 for advertising and outreach targeted toward the residents of these neighborhoods; at least $500,000 for a consumer financial education program to help increase access to credit for residents; and at least $750,000 for development of community partnerships to provide services that increase access to residential mortgage credit.
  • Open one new branch in a majority-Black and Hispanic neighborhood and evaluate future opportunities for expansion within Los Angeles County; ensure at least four mortgage loan officers are dedicated to serving majority-Black and Hispanic neighborhoods; and employ a full-time Community Lending Manager who will oversee the continued development of lending in majority-Black and Hispanic neighborhoods.
  • Conduct a Community Credit Needs Assessment, a research-based market study, to help identify the needs for financial services for majority-Black and Hispanic census tracts within the county.

“In advance of what would have been Dr. Martin Luther King Jr.’s 94th birthday, it is a fitting time to reaffirm our commitment to that work, and to the pursuit of justice for all Americans,” U.S. Attorney General Merrick B. Garland said.

About the author
Staff Writer
Katie Jensen is a staff writer at NMP.
Published
Jan 16, 2023
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