City National Bank Forced to Pay Hefty Price for Redlining Charges – $31 Million!
Redlining is a discriminatory practice in which banks and other lenders refuse to provide services, loans, or investments in certain neighborhoods, typically those populated by minority groups. It is illegal, and the consequences of being caught in the act can be severe. Case in point: City National Bank, which recently agreed to pay a hefty $31 million settlement to the federal government after being accused of redlining.
What is Redlining?
Redlining is the practice of refusing to provide services, loans, or investments in certain neighborhoods based on the race, ethnicity, or income levels of the residents. The term “redlining” comes from the practice of marking certain neighborhoods on a map with a red line to indicate that they were off-limits to lenders. In the past, this practice was used by banks and other financial institutions to deny access to credit and other services to minority communities, leading to economic inequality and racial segregation.
What Happened with City National Bank?
City National Bank, one of the largest banks in the United States, was accused of redlining in 2019 by the Department of Justice (DOJ). The DOJ alleged that the bank had denied access to credit and other services to minority neighborhoods, in violation of the Fair Housing Act and Equal Credit Opportunity Act.
The investigation found that City National Bank had disproportionately denied mortgage applications from African American and Latino borrowers. The DOJ also found that the bank had failed to invest in minority neighborhoods, as required by the Community Reinvestment Act. As a result, City National Bank agreed to pay a $31 million settlement.
What Does the Settlement Mean?
The settlement reached between City National Bank and the DOJ is an important step in combating redlining. It sends a clear message to banks and other financial institutions that they will be held accountable if they engage in discriminatory practices.
The settlement includes a series of measures to ensure that City National Bank’s services are available to all communities, regardless of race or ethnicity. The bank is required to invest $20 million in a loan fund to support low- and moderate-income homebuyers, as well as $11 million in a fund for community development and affordable housing. The bank must also provide financial education and counseling to borrowers, and it must implement fair lending policies and practices.
What Does This Mean for Other Banks?
The settlement reached between City National Bank and the DOJ should serve as a warning to other banks and financial institutions. Banks should take this as an opportunity to review their policies and practices to make sure that they are not engaging in discriminatory practices. Banks should also use this as an opportunity to invest in minority neighborhoods, as this is an important step in promoting economic growth and opportunity.
It is also important to note that redlining is not only illegal, but it is also bad for business. Denying access to credit and other services to minority neighborhoods can lead to a lack of economic growth and opportunity, which can lead to a decrease in business.
Conclusion
City National Bank’s settlement with the DOJ is a reminder that banks and other financial institutions must take steps to ensure that their services are available to all communities, regardless of race or ethnicity. The settlement should serve as a warning to other banks and financial institutions to review their policies and practices and make sure that they are not engaging in discriminatory practices. Banks should also use this as an opportunity to invest in minority neighborhoods, as this is an important step in promoting economic growth and opportunity.