WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) and U.S. Department of Justice (DOJ), in cooperation with the Office of the Comptroller of the Currency (OCC), took action today to put an end to alleged redlining by Trustmark National Bank. The CFPB and DOJ allege that Trustmark discriminated against Black and Hispanic neighborhoods by deliberately not marketing, offering, or originating home loans to consumers in majority-Black and Hispanic neighborhoods in the Memphis metropolitan area. The CFPB and DOJ also allege that Trustmark discouraged consumers residing in or seeking credit for properties located in these neighborhoods from applying for credit.
If entered by the court, the settlement would require Trustmark to put $3.85 million into a loan subsidy program for impacted neighborhoods, increase its lending presence there, and implement proper fair lending procedures. The order would also impose a $5 million civil money penalty against the bank, and will credit the $4 million penalty collected by the OCC toward the satisfaction of this amount.
“Trustmark purposely excluded and discriminated against Black and Hispanic communities” said CFPB Director Rohit Chopra. “The federal government will be working to rid the market of racist business practices, including those by discriminatory algorithms.”
“Lending discrimination runs counter to fundamental promises of our economic system. When people are denied credit simply because of their race or national origin, their ability to share in our nation’s prosperity is all but eliminated,” said Attorney General Garland. “Today, we are committing ourselves to addressing modern-day redlining by making far more robust use of our fair lending authorities. We will spare no resource to ensure that federal fair lending laws are vigorously enforced and that financial institutions provide equal opportunity for every American to obtain credit.”
“The OCC has had a long history of strong partnership with the DOJ’s Housing and Civil Enforcement Section of the Civil Rights Division, referring potential fair lending violations and sharing our extensive examiner, economist, and legal findings, as we did in the Trustmark matter,” said Acting Comptroller of the Currency Michael J. Hsu. “Today’s announcement is important because it signifies the unified and unmitigated focus that each of our agencies has placed on the enforcement of the Fair Housing Act and the Equal Credit Opportunity Act. Our collective efforts are critical to addressing the discriminatory lending practices that create and reinforce racial inequity in the financial system.”
Trustmark is a national bank headquartered in Jackson, Mississippi with 196 branches in five southern states. It currently operates 22 branches in the Memphis metropolitan area. This matter arose from the OCC’s examination that identified potential redlining, resulting in investigations by the CFPB and DOJ.
Deliberately discriminating against Black and Hispanic communities in Memphis
The joint complaint alleges that Trustmark violated the Fair Housing Act (FHA), the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B, and the Consumer Financial Protection Act of 2010 (CFPA). ECOA and Regulation B prohibit creditors from discriminating against applicants and prospective applicants in credit transactions on the basis of characteristics such as race, color, and national origin, including by redlining or engaging in conduct that would discourage on a prohibited basis a prospective applicant from applying for credit. Specifically, the joint complaint alleges that Trustmark:
- Avoided locating branches in majority-Black and Hispanic communities:
From 2014 and 2018, only four of Trustmark’s 25 branches in the Memphis metropolitan area were located in majority-Black and Hispanic communities, although 50% of the census tracts in the Memphis MSA are majority-Black and Hispanic. Two of the branches were established or acquired in majority-white neighborhoods in Memphis and are only now in majority-Black and Hispanic neighborhoods because of shifting demographics. Trustmark also closed its only limited-service branch located in a majority-Black and Hispanic neighborhood in the Memphis MSA in 2015.
- Avoided assigning loan officers to majority-Black and Hispanic communities: During the relevant time period, Trustmark did not assign a single mortgage loan officer to any of its Memphis branches located in majority-Black and Hispanic neighborhoods. Thus, mortgage-lending services were not available to walk-in customers in majority-Black and Hispanic neighborhoods. Moreover, Trustmark relied almost entirely on its loan officers—all located in branches in majority-white neighborhoods—to conduct outreach to potential customers and distribute mortgage lending marketing materials.
- Failed to monitor its fair lending compliance: Trustmark’s internal fair lending policies and procedures were inadequate to ensure the bank was providing equal access to credit to majority-Black and Hispanic neighborhoods in the Memphis metropolitan area. Further, Trustmark did not establish internal governance and oversight committees to oversee fair lending until August 2018, months after the OCC initiated a fair lending examination of the bank.
- Discouraged applicants and prospective applicants in majority-Black and Hispanic neighborhoods: Trustmark is required under the Community Reinvestment Act to select an area and to meet the credit needs of residents in that area. In doing so, the bank designated three counties of the Memphis MSA that together contain 90% of the majority-Black and Hispanic census tracts in the entire Memphis MSA. From 2014 to 2018, however, Trustmark’s “peer lenders” generated 2.5 times more home mortgage loan applications from majority-Black and Hispanic neighborhoods in the Memphis MSA than Trustmark, showing the effect of Trustmark’s discouraging acts and practices.
Congress entrusted the Bureau to enforce the CFPA, ECOA, and ECOA’s implementing Regulation B. The proposed consent order, if entered by the court, would require Trustmark to:
- Invest $3.85 million via a loan subsidy program: To increase nondiscriminatory access to credit, Trustmark will establish a loan subsidy program that will offer loans to qualified applicants on a more affordable basis when borrowing to purchase properties in majority-Black and Hispanic neighborhoods in Memphis. The loan subsidies can include closing cost assistance, down payment assistance, and payment of mortgage insurance premiums.
- Increase physical presence in and outreach to majority-Black and Hispanic neighborhoods: Trustmark will open a new lending office in a majority-Black and Hispanic neighborhood within the Memphis metropolitan area and fund $200,000 in targeted advertising per year to generate applications for mortgage loans in majority-Black and Hispanic neighborhoods.
- Comply with fair lending requirements: Trustmark will take remedial steps to improve its fair lending compliance and serve the credit needs of majority-Black and Hispanic neighborhoods in the Memphis metropolitan area.
- Pay a civil penalty: The order will require Trustmark to pay a $5 million penalty to the CFPB, and will credit the $4 million penalty collected by the OCC toward the satisfaction of this amount.
The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.