Civil Rights Feds Settle Civil Suit With California Bank Alleging That $400K Minimum Loan Amount Policy Had Discriminatory Effect Against Blacks, Latinos

From the U.S. Department of Justice (Washington, D.C.):

• The Justice Department announced [] that Luther Burbank Savings will invest $2 million in California communities and take other steps as part of a settlement to resolve allegations that it engaged in a pattern or practice of discrimination on the basis of race and national origin. The settlement, which is subject to court approval, was filed in conjunction with the Justice Department’s complaint in the U.S. District Court for the Central District of California. The complaint alleges that from 2006 through mid-2011, Luther enforced a $400,000 minimum loan amount policy for its wholesale single-family residential mortgage loan program. The department alleges that this policy or practice had a disparate impact on the basis of race and national origin. “Today’s settlement demonstrates that the Justice Department is committed to addressing a wide range of abuses in the credit market,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “It is critical that lenders have policies in place to ensure that they don’t discriminate in their lending programs. We commend Luther Burbank Savings for revising its policies and working with the Justice Department to reach an appropriate resolution in this case.” The complaint alleges that from 2006 through 2010, Luther Burbank Savings, a prime lender, originated very few single-family residential mortgage loans to African-American or Hispanic borrowers or in majority-minority tracts throughout California. In the greater Los Angeles area, for example, only 5.8 percent of Luther’s single-family residential mortgage loans were made to African-American and Hispanic borrowers during this time period, compared to 31.8 percent of such loans made to African-American and Hispanic borrowers by comparable prime lenders. Similarly, only 5.2 percent of Luther’s single-family residential loans in the greater Los Angeles area were made in majority-minority census tracts (areas with a non-white population greater than 50 percent) during this time period, compared to 41.7 percent of such loans made in these tracts by comparable prime lenders. The complaint alleges that Luther continued its $400,000 minimum loan amount policy despite its knowledge that its low level of lending to African-American and Hispanic borrowers, and in majority-minority census tracts, was attributable to the policy.

For the Justice Department press release, see Justice Department Reaches Settlement with Luther Burbank Savings to Resolve Allegations of Lending Discrimination in California (Settlement Provides $2 Million to Remedy Effects of Minimum Loan Amount Policy).