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On May 21, the U.S. District Court for the Western District of Tennessee granted a joint motion by the CFPB and DOJ to terminate a 2021 redlining settlement with a regional bank, vacating the consent order and dismissing the case with prejudice. The original lawsuit, filed in October 2021, alleged violations of the Fair Housing Act (FHA) Equal Credit Opportunity Act (ECOA) and Consumer Financial Protection Act (CFPA).
The complaint accused the bank of engaging in unlawful redlining from 2014 to 2018 by failing to serve the credit needs of majority-Black and Hispanic neighborhoods in the Memphis Metropolitan Statistical Area.
Specifically, the complaint alleged that the bank:
- Located nearly all mortgage officers in white neighborhoods. The bank assigned no mortgage loan officers to branches in majority-Black and Hispanic census tracts.
- Failed to advertise or conduct outreach in minority neighborhoods. Marketing was concentrated in commercial media outlets and business-focused publications distributed in majority-white areas.
- Lacked internal fair lending oversight. The bank allegedly did not conduct a comprehensive internal fair lending assessment until 2018.
- Significantly underperformed peer lenders. Only 10% of mortgage applications and 8.3% of originations came from majority-Black and Hispanic neighborhoods—less than half the peer average.
Under the consent order, the bank agreed to pay a $5 million civil penalty, invest $3.85 million in a loan subsidiary fund, open a mortgage loan production office in a minority neighborhood, and spend an additional $600,000 on community development and outreach. The consent order was scheduled to last five years, but was terminated early after the agencies found that the bank had disbursed all required relief and was in "substantial compliance" with the orders terms.
Putting It Into Practice: By ending the redlining settlement early, the CFPB continues to back away from redlining enforcement actions launched under the prior administration (previously discussed here). While institutions should remain focused on fair lending compliance, these moves suggest federal scrutiny of redlining—particularly cases built on statistical evidence or marketing practices—may be easing.
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