PNC settles U.S. charges over National City mortgage bias

Reuters

By Jonathan Stempel

Dec 23 (Reuters) - PNC Financial Services Group Inc agreed to pay $35 million to settle U.S. charges that the former National City Corp discriminated against African-American and Hispanic borrowers by charging them more on home mortgages because of their race or national origin.

National City, which PNC bought on Dec. 31, 2008, violated the federal Fair Housing Act and Equal Credit Opportunity Act in imposing higher fees or interest rates on more than 75,000 minority borrowers, the U.S. Department of Justice and U.S. Consumer Financial Protection Bureau said on Monday.

The settlement was announced three days after the Justice Department and CFPB said Ally Financial Inc would pay $98 million to settle claims that it discriminated in auto lending by charging 235,000 minority borrowers higher interest rates than white borrowers.

PNC will pay the $35 million into a fund to compensate victims. The accord requires court approval and relates solely to loans made by National City, and not to Pittsburgh-based PNC's mortgage lending practices. PNC had on Aug. 8 disclosed the government probe, and that it was cooperating.

"It undermines confidence in our banking system when people get different deals not only based on their credit scores, but their skin color," U.S. Attorney Steve Dettelbach in Cleveland, where National City had been based, said in a statement. "With all the positive things for which National City Bank stood for so many years, this is a troubling epilogue."

According to court papers, the alleged violations involved loans made through more than 410 National City retail offices from 2002 to 2008, and by mortgage brokers from 2003 to 2008.

Authorities said National City financially rewarded loan officers for imposing extra charges, known as "overages," that were not related to borrowers' creditworthiness, and did not properly monitor how they were imposed.

This resulted in statistically significant discriminatory pricing disparities based on race and national origin, and caused more than 41,000 Hispanic borrowers and more than 34,000 African-American borrowers to overpay, authorities said.

With roots dating to 1845, National City had been one of the 10 largest U.S. banks and mortgage lenders.

It sold itself to PNC as losses mounted from subprime and other troubled mortgages, and its recent acquisitions of two Florida banks. The merger nearly doubled PNC's size.

In a statement, PNC spokesman Fred Solomon said the bank "is committed to fair lending for all," has improved National City's mortgage procedures, and has discontinued National City's mortgage broker channel and some of its practices.

The case is Consumer Financial Protection Bureau et al v. National City Bank, U.S. District Court, Western District of Pennsylvania.

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