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Redlining: CFPB and DOJ action requires BancorpSouth Bank to pay millions to harmed consumers

Redlining is a term used for an illegal practice where people living in a certain area or neighborhood are not given the same access to credit as people in other areas or neighborhoods on the basis of race, color, or for some other prohibited reason. Though the practice has been illegal for decades, it still goes on today.  

The Equal Credit Opportunity Act (ECOA) prohibits lenders from discriminating based on race and other characteristics. Today, along with the Department of Justice (DOJ), we filed a complaint alleging that BancorpSouth Bank violated ECOA and the Fair Housing Act by discriminating against African Americans and other minority consumers.

The complaint alleges that BancorpSouth illegally denied fair access to credit to residents in minority neighborhoods in the Memphis area by, among other things, opening branches and targeting its marketing activity outside of minority neighborhoods. These actions discouraged prospective borrowers in minority communities from applying for credit. Maps reflecting how BancorpSouth avoided and discouraged prospective borrowers in minority neighborhoods show the alleged discrimination .

Our complaint also alleges that BancorpSouth unlawfully denied African-American applicants certain mortgage loans and overcharged some of its African-American customers. In addition, the complaint alleges that the Bank required its employees to review applications from minorities more quickly than others, and not to provide them the opportunity to receive credit assistance that might have improved their chances of getting a loan.

We sent undercover testers to several BancorpSouth branches to ask about getting a mortgage loan, and found that BancorpSouth employees treated African-American testers worse than they treated 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.

We work to protect you from these types of unlawful practices and to hold companies accountable for their actions. Along with the DOJ, we are filing a proposed consent order, which if entered by the court will require BancorpSouth to: 

  • Revise its policies to prevent discrimination in the future
  • Provide fair lending training to its employees, including training on implicit racial bias
  • Pay $4 million to subsidize mortgage loans in the minority neighborhoods in the Memphis area that were allegedly redlined
  • Open a new branch or loan production office in a high-minority neighborhood in the Memphis area
  • Invest $500,000 to partner with community-based organizations that provide education, credit repair, and other  assistance in minority neighborhoods in the Memphis area
  • Spend $100,000 per year during the term of the order on advertising in minority neighborhoods in the Memphis area
  • Pay $2.78 million to African-American consumers who were unlawfully denied loans or overcharged for their loans
  • Offer subsidized credit to African-American consumers who were wrongfully denied loans, and
  • Pay a $3.03 million penalty

Protections against discrimination

Remember, it’s illegal for a creditor to discriminate during any aspect of a credit transaction based on certain characteristics, including race. If you believe a lender has discriminated against you or someone else for any reason, you can submit a complaint online or by calling (855) 411-2372.

Learn more about the warning signs of discrimination and what you can do to protect yourself on our website.

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