Years ago, redlining was a name used for the discriminatory practice where people living in certain areas or neighborhoods were not given the same access to credit as people in other areas. The term “redlining” refers to the practice of using a red line on a map to show the area where financial institutions would not invest. Although Fair Lending laws have been enacted and redlining has been illegal for years, it still goes on today, as illustrated in last month’s Consumer Financial Protection Bureau (CFPB) and Department of Justice’s joint action against BancorpSouth Bank.
The CFPB has publicized its fair lending examination agenda in recent Supervisory Highlights, and other regulators are apt to follow suit in their exams. This recent anti-redlining case involved “mystery shoppers” that went to several of the bank’s branches to inquire about mortgages. The CFPB alleges Black applicants were denied certain mortgage loans. In addition, the complaint alleges that the Bank required its employees to review applications from minorities more quickly than others, and not to provide them the opportunity to receive credit assistance that might have improved their chances of getting a loan. An example of totally bad behavior, but it also serves as a good reminder for Credit Unions to perform ongoing due diligence with their fair lending compliance efforts.continue reading »