Patriot Bank to pay $1.9M to settle DOJ redlining probe
Dive Brief:
Patriot Bank has agreed to pay $1.9 million to settle a probe into allegations the lender avoided providing mortgage services to majority-Black and Hispanic neighborhoods in Memphis and discouraged people seeking credit in those communities from obtaining home loans, the Justice Department said Wednesday.
From 2015 through at least 2020, other banks received nearly 3.5 times as many loan applications compared to Patriot in majority-Black and Hispanic neighborhoods in Memphis, the agency said.
Under the proposed consent order, Patriot will invest at least $1.3 million in a loan subsidy fund to increase home mortgage, home improvement and home refinance for majority-Black and Hispanic neighborhood residents.
Dive Insight:
Wednesday’s agreement comes more than two years after the DOJ announced a coordinated effort to fight discrimination against communities of color alongside the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency. With the Patriot settlement — the 11th redlining case since 2021 — the initiative will secure over $109 million in relief.
“The Justice Department is dedicated to stamping out discriminatory lending practices across this country and we are vigorously committed to holding lenders accountable, no matter their size,” Assistant Attorney General Kristen Clarke of the Justice Department’s civil rights division said in a statement Wednesday. “This settlement will provide many Memphis families with access to credit that will improve the quality of their lives while opening up opportunities to build intergenerational wealth.”
Patriot Bank, a community bank with eight branches serving residents in Memphis and Shelby, Tipton and Fayette counties, co-operated with the department’s investigation and worked with it to resolve the redlining allegations, the DOJ said.
“Patriot Bank has always acted to serve the home mortgage credit needs in minority neighborhoods, and the bank’s strong record speaks for itself and flatly contradicts any allegation of wrongdoing,” John Smith, president and CEO of Patriot Bank, said in a statement. “We are proud of our record and strongly deny that Patriot Bank ever avoided originating home mortgage loans in Black and Hispanic areas of the Memphis market.”
The DOJ alleged that during the six-year period, Patriot’s home mortgage lending was focused “disproportionately” on White areas around the City of Memphis.
“Even when Patriot generated loan applications from majority-Black and Hispanic areas, the applicants themselves were disproportionately white,” the DOJ said.
Under the proposed consent order, Patriot will spend $375,000 for advertising, outreach, consumer financial education and credit counseling focused on majority-Black and Hispanic neighborhoods. Patriot must also invest $225,000 in community partnerships to provide services that increase residential mortgage credit access for residents of those areas.
Patriot will also dedicate two mortgage loan officers to serve majority-Black and Hispanic neighborhoods in the bank’s service area and employ a director of community lending to oversee the continued lending development in communities of color.
The DOJ said it investigated Patriot’s lending practices after receiving a referral from the bank’s regulator, the Board of Governors of the Federal Reserve System.
Patriot said it voluntarily collaborated with the agency to resolve the allegations made against the lender.
“The bank entered into a Consent Order with the DOJ because the terms of the agreement affirm and adopt the programs and actions that the bank has already been implementing on its own for many years to help meet mortgage credit needs in the communities it serves, including its investment of $1.9 million in reaching and serving communities of color, as the Consent Order itself states,” the bank said in a statement.
Recently, Patriot partnered with a leading community development organization and the City of Memphis to finance a residential subdivision in a low-income and Black neighborhood in South Memphis, the bank said.
This is the third time Memphis has been in the news for a redlining probe since an effort to curb discrimination against communities of color was launched in 2021 by Attorney General Merrick B. Garland and Clarke.
In October 2021, the DOJ, CFPB and OCC announced a $5 million settlement with Trustmark Bank over allegations the $17 billion-asset Jackson, Mississippi-based bank engaged in discriminatory lending practices in Memphis from 2014 to 2018.
Almost a year later, in September 2022, the DOJ announced an agreement with Evolve Trust and Bank, headquartered in Memphis, to settle lending discrimination based on race, sex and national origin in the pricing of its residential mortgage loans from at least 2014 through 2019.
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