Bank of America Corp.‘s banking unit has settled charges that it discriminated against prospective borrowers who received disability income. The loan applications of tens of thousands of prior applicants will be reviewed to determine who will be compensated.
A settlement between Bank of America, N.A., and the Department of Justice filed Thursday in U.S. District Court for the District of North Carolina resolves allegations that the bank violated the Fair Housing Act and the Equal Credit Opportunity Act when it discriminated on the basis of disability and receipt of public assistance, according to a news released from the Justice Department.
The settlement is subject to court approval.
The agreement calls for BofA to pay between $1,000 and $5,000 to eligible loan applicants who were asked to provide letters from their doctors to document the income they received from Social Security Disability Insurance, the government said. The amount of each individual payment depends on the level of detail that BofA required.
A third-party administrator will be hired by BofA to identify potential victims from 25,000 loan applications involving SSDI income.
Also as part of the settlement, the bank will conduct employee training for loan officers and underwriters and monitor loan applications to ensure compliance with applicable law.
The Department of Housing and Urban Development presented the Department of Justice with charges in February that BofA discriminated against homeowners with disabilities by imposing “unnecessary and burdensome requirements on borrowers who relied on disability income to qualify for their home loans.” It was HUD’s action that prompted the lawsuit and accompanying settlement.
The settlement additionally requires the revision of BofA’s related policies, a process the Charlotte, N.C.-based company started during an investigation by HUD.
HUD complainants will receive $125,000 to compensate them for costs associated with their loan applications.
“Bank of America cooperated fully with the department’s investigation into its lending practices and agreed to settle this matter without contested litigation,” the government’s statement said. “The lawsuit was developed and filed by the Fair Lending Unit of the Housing and Civil Enforcement Section in the Justice Department’s Civil Rights Division.”
The Department of Justice touted 22 lending matters that have been filed or resolved since the Fair Lending Unit was established in February 2010. Settlements in such cases have resulted in $370 million in monetary relief for more than 200,000 individual borrowers.
BofA settled allegations in June that it discriminated against a woman on maternity leave when it told her to return to work before it would process her application.
In December, BofA agreed to pay $335 million to settle allegations that subsidiary Countrywide Financial Corp. systematically discriminated against minority homebuyers at the peak of the U.S. housing boom.