Largest Bank Headquartered In LA Will Pay Over $31M In Redlining Settlement


Officials at the U.S. Department of Justice announced on Thursday that they have secured over $31 million from City National Bank to resolve allegations of redlining in Los Angeles County.

City National is the largest bank headquartered in Los Angeles and among the 50 largest banks in the country.

This is the largest redlining settlement agreement in the department’s history, according to a press release. Redlining is an illegal practice where lenders avoid providing credit services to individuals living in communities of color because of the race, color, or national origin of the residents in those communities.

According to the complaint filed in federal court, City National avoided providing mortgage lending services to majority-Black and Hispanic neighborhoods in Los Angeles County and discouraged residents in these neighborhoods from obtaining mortgage loans from 2017 through at least 2020.

The complaint also alleges that during that time period, other banks received more than six times as many applications in majority-Black and Hispanic neighborhoods in Los Angeles County than City National each year.

In addition, City National opened just one branch in a majority-Black and Hispanic neighborhood in the past 20 years. There was no employee assigned to generate mortgage loan applications at that branch.

The agreement is part of the department’s Combating Redlining Initiative that Attorney General Merrick Garland launched in October of 2021.

“So far, the Combating Redlining Initiative has secured over $75 million dollars in relief for communities that have suffered from lending discrimination. The Justice Department will continue to build on our efforts to vigorously enforce federal fair lending laws and work to ensure that financial institutions provide equal opportunity for every American to obtain credit. In advance of what would have been Dr. Martin Luther King Jr.’s 94th birthday, it is a fitting time to reaffirm our commitment to that work, and to the pursuit of justice for all Americans,” Garland said in a statement.

King was born on Jan. 15, 1929.

Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division said the settlement embodies King’s commitment to fighting economic injustice and ensuring that Black Americans and all communities of color are able to access the American dream.

“Redlining is a practice from a bygone era, runs contrary to the principles of equity and justice, and has no place in our economy today. This settlement should send a strong message to the financial industry that we expect lenders to serve all members of the community and that they will be held accountable when they fail to do so,” Clarke said in a statement.

U.S. Attorney Martin Estrada for the Central District of California said the issue of fair housing is a moral issue.

“It is unacceptable that redlining persists into the 21st century, and this case demonstrates our commitment to combat redlining and hold banks and others accountable when they engage in unlawful discrimination. Through this agreement, we are taking a major step forward by removing unlawful and discriminatory barriers in residential mortgage lending, and meeting the credit needs in Los Angeles,” Estrada said in a statement.

Under the proposed consent order, which was filed Thursday at the U.S. District Court for the Central District of California along with a complaint, leaders at City National Bank have agreed to do the following:

  • Invest at least $29.5 million in a loan subsidy fund for residents of majority-Black and Hispanic neighborhoods in Los Angeles County; at least $500,000 for advertising and outreach targeted toward the residents of these neighborhoods; at least $500,000 for a consumer financial education program to help increase access to credit for residents; and at least $750,000 for development of community partnerships to provide services that increase access to residential mortgage credit.
  • Open one new branch in a majority-Black and Hispanic neighborhood and evaluate future opportunities for expansion within Los Angeles County; ensure at least four mortgage loan officers are dedicated to serving majority-Black and Hispanic neighborhoods; and employ a full-time Community Lending Manager who will oversee the continued development of lending in majority-Black and Hispanic neighborhoods.
  • Conduct a Community Credit Needs Assessment, a research-based market study, to help identify the needs for financial services for majority-Black and Hispanic census tracts within Los Angeles County.

According to Marc Morial, president and CEO of the National Urban League in New York City, when people of color suffer racist engagement in the financial marketplace, it causes substantial harm.

“Throughout our work, we have seen the dire consequences of an American financial system that has systematically cut off and shut out individuals, families, businesses, and communities of color from access to capital,” Morial said in a post on the league’s website.

Morial said exclusionary and biased practices have been widely documented, including the banking industry’s tendency to disproportionately open and operate branches in white and non-minority communities.

“When people of color suffer racist engagement in the financial marketplace, it causes substantial monetary and non-monetary harm. Depending on how the racist behavior occurs, be it systematic, digital, in-person, community members often are unaware they received disparate treatment or a discriminatory outcome. This stems from a centuries-long strain of the Black and minority community with banking institutions,” Morial said.

Morial said a clear solution is to invest in and strengthen Black-owned banks.

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