Rhode Island-based Washington Trust Company is set to pay $9 million over the next five years in a settlement following Department of Justice claims of discrimination against Black and Hispanic residents seeking mortgages in the state from 2016 to 2021.
The Rhode Island U.S. Attorney's Office accuses the bank of "redlining," a practice where services like loans and mortgages are denied based on ethnicity or race. The complaint details how Washington Trust seemingly deterred lending in majority Black and Hispanic areas by not establishing branches, relying on mortgage loan officers working out of only majority-white areas as the primary source for generating loan applications and failing to train or incentivize its lending staff or conduct outreach, marketing, and advertising of its mortgage services to compensate for its lack of branches in majority-Black and Hispanic areas.
“This settlement should send a strong message to banks regarding the Justice Department’s firm commitment to combat modern-day redlining and ensure that all lenders are providing equal access to home loan opportunities to communities of color,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division.
The bank's 2016 strategy marked the entire state as its target area, leading to the expansion of branches. However, as U.S. Attorney Zachary Cunha pointed out, these expansions excluded majority Black or Hispanic communities. When they extended credit facilities to these communities, most of their clients turned out to be white, unlike other banks in the state.
The investigation also revealed that Washington Trust had knowledge of these discriminatory practices as early as 2011 from internal and external reports. However, the bank took no significant action, even with clear indications of its redlining tendencies.
In 2021, Attorney General Merrick Garland initiated an anti-redlining campaign. An examination of the Rhode Island loan application and demographic data showed a conspicuous disparity in loans provided by Washington Trust compared to other state lenders.
How The Settlement Is Allocated
Of the proposed settlement:
- $7 million is designated to assist potential buyers.
- $1 million is earmarked for groups that support people in predominantly Black and Hispanic areas with credit, financial education, and homeownership.
- $1 million will be used for advertising, outreach, and educational initiatives.
The grants, aimed at assisting home buyers, will prioritize those living in or purchasing property in majority Black and Hispanic census tracts. Washington Trust will also open two new "full-service" branches in these tracts as part of the agreement. Additionally, two dedicated mortgage loan officers will be assigned to work in these areas.
A large portion of the bank's website will be translated into Spanish to address the language barrier.
A federal judge has yet to approve the proposed agreement.