BancorpSouth, announced this week that it has entered into a consent order with the Department of Justice and the Consumer Financial Protection Bureau pursuant to alleged violations of the Fair Housing Act and Equal Credit Opportunity Act. The settlement, which requires the approval of the United States District Court for the Northern District of Mississippi, will fully and finally resolve all claims by the DOJ and CFPB against BancorpSouth.
BancorpSouth has been accused of a form of racial discrimination known as “redlining,” a practice where people living in certain areas are not given the same access to credit as other people, usually on the basis of race. The practice has been illegal for decades. According to the CFPB and the DOJ, BancorpSouth illegally denied access to credit to residents in minority neighborhoods in Memphis by illegally denying African American applicants some types of mortgage loan and overcharged some of them. The bank allegedly also required its employees to review applications from minority borrowers more quickly than others and deny them the opportunity to receive credit assistance that might have improved their chances of getting a loan.
The settlement was the result of investigations that began in 2014 by the DOJ and CFPB. As with previous CFPB investigations, data was collected from material several years old. In the case of BancorpSouth, some loan applications were from 2011. In a new twist to its investigations, the CFPB said in its release that it sent “undercover testers” to several BancorpSouth branches to ask about getting a mortgage loan. The investigation found that bank employees treated African American testers worse than white testers with similar credit qualifications. The consent order submitted to the court includes a citation to an audio file surreptitiously recorded by undercover CFPB investigators.
If approved by the court, the consent order would require the bank to revise its policies and provide fair-lending training to its employees, as well as pay a penalty of $3.03 million In addition, the bank will be required to pay $4 million to subsidize mortgages in Memphis-area minority neighborhoods that were allegedly redlined, pay $2.8 million to African American consumers who were unlawfully denied loans or were overcharged, invest $500,000 to partner with community organizations that provide education, credit repair and other assistance in minority neighborhoods, and spend $100,000 per year for a certain term on advertising in minority neighborhoods in the Memphis area. Additionally, BancorpSouth agrees to open a new branch in one of the affected the neighborhoods.