A settlement has been reached between the government and Bancorp South Inc.’s banking subsidiary over allegations of discrimination and redlining.
Tupelo, Mississippi-based BancorpSouth Bank has agreed to settle allegations that it violated the Fair Housing Act and the Equal Credit Opportunity Act.
The financial institution is accused of redlining by meeting the needs of borrowers in white neighborhoods while avoiding lending in minority neighborhoods.
The alleged discrimination took place from 2011 through 2013 in the Memphis,
Tennessee, metropolitan statistical area — where it ranked among the top-four lenders out of around 400. The MSA includes parts of Arkansas and Mississippi.
During the period, more than 50,000 home loans were originated.
While whites reportedly make up less than half of the Memphis MSA,
BancorpSouth excluded all neighborhoods where a majority of residents were minorities from its Community Reinvestment Act area.
The organization also allegedly granted loan officers
substantial discretion in determining whether to approve or deny a loan. It additionally had limited standards in place to ensure that loan officers consistently priced mortgage loans in the same manner or used the same criteria.
“Such wide flexibility in loan underwriting and pricing resulted in the bank’s denying African-American applicants for mortgage loans at significantly higher rates than white applicants with similar credit profiles,” an announcement from the Department of Justice stated. “It also resulted in the bank charging African-American borrowers higher interest rates than similarly-situated white borrowers.”
It is additionally accused of implementing a discriminatory practice of requiring employees to deny applications from minorities more quickly than similarly-situated white applicants and not provide credit assistance to borderline applicants that other applicants may have received.
A 2012 audio recording was cited that had a manager advising production employees
that applications from protected class members must be denied within 21 days even though white applicants were not subject to this shorter time frame.
“During this meeting, BancorpSouth employees made several racially insensitive comments followed by laughter,” the government said.
The Consumer Financial Protection Bureau sent testers out to six branches in 2013 and determined that loan originators treated black borrowers less favorably than similarly situated white customers.
BancorpSouth agreed to settle the charges with the CFPB and the Justice Department. The agreement is subject to court approval.
The settlement requires the bank to
pay nearly $7 million in relief for impacted individuals and neighborhoods and a $3 million civil penalty.
In addition, it has to invest at least $800,000 in advertising, outreach and community partnership efforts as well as amend its policies, standards and training to ensure compliance with fair lending obligations.
For its part, BancorpSouth said it has
taken a number of steps to enhance its compliance management systems, reduce its fair lending risk and increase its lending in minority areas since 2012.
In addition to opening a new Memphis branch, the bank said it added a new director of community lending, chief fair lending officer and community development lending manager.
“The settlement is an opportunity for the bank to avoid protracted litigation with the DOJ and CFPB, and to instead devote additional resources to continue serving the communities in which it operates, including helping meet the credit needs of all borrowers in those communities,” the statement said.
