The Consumer Financial Protection Bureau and the U.S. Department of Justice are suing developer and lender Colony Ridge, alleging it targeted Hispanic borrowers with “bait-and-switch” land sales and predatory loans.
The lawsuit claims Colony Ridge gave borrowers inaccurate information about homesites and coerced them into loans they could not afford, according to the CFPB’s press release.
“Our investigation uncovered that Colony Ridge is baiting borrowers with lies, saddling families with predatory loans for homesites that the company knows have repeatedly flooded with raw sewage and lacked basic utility infrastructure,” said CFPB Director Rohit Chopra.
Colony Ridge allegedly sold families flood-prone land without water, sewer, or electrical infrastructure. They are being charged with violating the Interstate Land Sales Full Disclosure Act.
Officials say borrowers were charged interest rates above 10% between 2017 and 2021, when rates were typically 2.35% to 4.05%. When the homes were foreclosed on, Colony Ridge repurchased and sold the properties.
Roughly one of every four Colony Ridge loans ends in foreclosure, according to the press release.
The complaint also alleges that the lender exploited language barriers by marketing in Spanish but forcing Spanish-speaking borrowers to sign transaction documents in English.
“Discrimination in lending harms families and neighborhoods for generations, it is wrong, and it has no place in our country. That is why I launched the Department’s Combating Redlining Initiative more than two years ago and why we remain steadfast in our commitment to continue this work,” Attorney General Merrick B. Garland added.
Colony Ridge’s CEO John Harris called the lawsuit “baseless and both outrageous and inflammatory.”
Harris said they were “blindsided” by the allegations in a statement released to NBC News.
“We are concerned that the Justice Department would pursue this action,” Harris said. “We loan to those who have no opportunity to get a loan from anyone else and we are proud of the relationship we have developed with customers. We look forward to telling the true story of Colony Ridge.”
The company came under scrutiny separately earlier this year when Texas state officials argued a residential community it developed harbored drug cartel members and illegal immigrants. However, officials who toured the community said the claims were false.
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