This past Thursday, Businessweek covered a massive settlement in a federal lawsuit alleging racial discrimination in SunTrust’s lending practices. The suit, filed by the US DOJ, was filed in the U.S. District Court in Richmond, VA, alleging more than 20,000 African-American and Hispanic borrowers were charged more than similarly-situated and qualified non-Hispanic white borrowers, between 2005 and 2009.
The suit alleged that minority borrowers in 75 geographic markets from Virginia Beach, VA to San Francisco, CA, paid more in loan fees, or were charged higher interest rates based solely on race or national origin.
A consent order filed with the complaint says SunTrust denies any wrongdoing, but agreed to the settlement. "SunTrust strongly believes in the principles of fair lending," company spokesman Mike McCoy in Atlanta said. "We are pleased to have reached a settlement and put this matter behind us."
Settlements like this come as a surprise, considering the massive $335 million fair-lending settlement with the “Big 5” banks. "At the core of the complaint is a simple story: If you were African-American or Latino, you likely paid more for a SunTrust loan than a similarly qualified white borrower simply because of your skin color ... You paid what amounted to a racial surtax that ranged from hundreds to thousands of dollars," said Thomas E. Perez, assistant attorney general for the Civil Rights Division.
The suit sprang forth from a referral from the Federal Reserve, which reviewed the Richmond-based mortgage company's compliance with the Fair Housing Act and the Equal Credit Opportunity Act. The DOJ said it reviewed more than 850,000 residential mortgage loans originated by SunTrust between 2005 and 2009.
According to the data, SunTrust set prices based on objective credit-related criteria but allowed its own loan officers as well as its national network of brokers to adjust those prices without regard to borrower risk, often resulting in black and Latino customers paying more than white borrowers. SunTrust "incentivized discrimination" by sharing the inflated charges with those loan officers and brokers, Perez said. “Those minority borrowers had no idea white customers with similar credit would pay less ... That is discrimination with a smile."
Brokers generally extracted larger overpayments. For example, Latino customers in Dallas borrowing $200,000 through a broker paid about $1,360 more than similarly qualified white borrowers while black customers in Atlanta were charged about $745 more than white voters.
According to the consent decree, SunTrust will be required to put the $21 million into an interest-bearing escrow account. Borrowers in 34 states and the District of Columbia who paid too much will be contacted. Any money left over after borrowers are compensated will be distributed to fair-housing and credit-counseling organizations.
The settlement is pending court approval.
The suit alleged that minority borrowers in 75 geographic markets from Virginia Beach, VA to San Francisco, CA, paid more in loan fees, or were charged higher interest rates based solely on race or national origin.
A consent order filed with the complaint says SunTrust denies any wrongdoing, but agreed to the settlement. "SunTrust strongly believes in the principles of fair lending," company spokesman Mike McCoy in Atlanta said. "We are pleased to have reached a settlement and put this matter behind us."
Settlements like this come as a surprise, considering the massive $335 million fair-lending settlement with the “Big 5” banks. "At the core of the complaint is a simple story: If you were African-American or Latino, you likely paid more for a SunTrust loan than a similarly qualified white borrower simply because of your skin color ... You paid what amounted to a racial surtax that ranged from hundreds to thousands of dollars," said Thomas E. Perez, assistant attorney general for the Civil Rights Division.
The suit sprang forth from a referral from the Federal Reserve, which reviewed the Richmond-based mortgage company's compliance with the Fair Housing Act and the Equal Credit Opportunity Act. The DOJ said it reviewed more than 850,000 residential mortgage loans originated by SunTrust between 2005 and 2009.
According to the data, SunTrust set prices based on objective credit-related criteria but allowed its own loan officers as well as its national network of brokers to adjust those prices without regard to borrower risk, often resulting in black and Latino customers paying more than white borrowers. SunTrust "incentivized discrimination" by sharing the inflated charges with those loan officers and brokers, Perez said. “Those minority borrowers had no idea white customers with similar credit would pay less ... That is discrimination with a smile."
Brokers generally extracted larger overpayments. For example, Latino customers in Dallas borrowing $200,000 through a broker paid about $1,360 more than similarly qualified white borrowers while black customers in Atlanta were charged about $745 more than white voters.
According to the consent decree, SunTrust will be required to put the $21 million into an interest-bearing escrow account. Borrowers in 34 states and the District of Columbia who paid too much will be contacted. Any money left over after borrowers are compensated will be distributed to fair-housing and credit-counseling organizations.
The settlement is pending court approval.
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A consent order filed with the complaint says SunTrust denies any wrongdoing, but agreed to the settlement. "SunTrust strongly believes in the principles of fair lending structured settlement quote
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ReplyDeletebut agreed to the settlement. "SunTrust strongly believes in the principles of fair lending," company spokesman Mike McCoy in Atlanta said. "We are pleased to have reached a settlement and put this matter behind us." settlement quotes
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