U.S. Justice Department Announces New Initiative to Tackle Racially Discriminatory Lending Practices

The U.S. Justice Department announced efforts to better crack down on reports of redlining–an illegal, racist practice that has discriminated against communities of color for years–and prosecute those who continue to uphold it.

According to a news release from the department, its Combatting Redlining Initiative will take various approaches to do this–including efforts to strengthen partnerships with financial agencies to make sure redlining is better identified and referred to authorities, and also increasing coordination with state officials to weed out potential fair lending violations.

Lenders participate in redlining when they refuse to provide services to people based on their race or where they live. Per Investopedia, the term is a reference to how federal government officials and lenders would draw a red line on a map around neighborhoods they wouldn’t invest in based on demographics.

Black neighborhoods were frequently redlined and the residents that lived in them were routinely denied various financial opportunities as a result.

The practice was outlawed by the Fair Housing Act, which was part of the Civil Rights Act of 1968.

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From the Associated Press:

Despite a half century of laws designed to combat redlining, the racist practice continues across the country and the long-term effects are still felt to this day. The average net worth of a Black family is a fraction of a typical white household, and homes found in historically redlined neighborhoods are still worth less than homes found in non-redlined communities.

“Lending discrimination runs counter to fundamental promises of our economic system,” said Attorney General Merrick Garland, in prepared remarks. “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.”

Garland said the department is currently investigating several redlining cases and expects it will be opening more in the coming months.

“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,” Garland said.

According to the AP, the justice department’s efforts are going to primarily focus on instances of digital redlining carried out by algorithms.

In addition to explaining its renewed focus on combatting redlining, the justice department also announced on Friday that it has reached a settlement with Trustmark National Bank regarding allegations of redlining against majority Black and Hispanic neighborhoods in Memphis.

More from the AP:

Trustmark, a bank primarily found in the South with $13 billion in assets, will be required to open a mortgage office in a majority-Black and Hispanic neighborhood within the Memphis metropolitan area as well as contribute $3.85 million toward a fund to create loan subsidies for borrowers in discriminated neighborhoods. The agreement calls for a $4 million payment to the OCC and $1 million payment to the CFPB, for a total of $5 million.

Trustmark President and CEO Duane Dewey said in a statement that the bank fully cooperated with the DOJ’s investigation to “avoid the distraction of protracted litigation.” The discriminatory acts happened between at least 2014 and 2016, and the bank has made efforts to fix these practices, he said.