Trustmark National Bank has redlined predominantly Black and Hispanic neighborhoods in Memphis and should follow several initiatives to remedy the discrimination, federal officials alleged in a lawsuit and consent order filed Friday.
Redlining occurs when lenders refuse to provide services to people in non-white communities. It was banned by the Fair Housing Act.
The suit, filed in the Western District of Tennessee, is brought against the bank by the United States of America and the Consumer Financial Protection Bureau, and is part of a new federal effort to investigate and prosecute redlining.
“Lending discrimination runs counter to fundamental promises of our economic system,” Attorney General Merrick Garland said in prepared remarks Friday. “When people are denied credit simply because of their race or national origin, their ability to share in our nation’s prosperity is all but eliminated.”
Garland said the department is currently investigating several redlining cases and expects it will be opening more in the coming months.
“We will spare no resource to ensure that federal fair lending laws are vigorously enforced and that financial institutions provide equal opportunity for every American to obtain credit,” Garland said.
The Memphis suit alleges Trustmark, from 2014 to 2018, violated the “Fair Housing Act and the Equal Credit Opportunity Act, which prohibit financial institutions from discriminating on the basis of race, color, or national origin in their mortgage lending services.”
In the Memphis area at the time, 21 of Trustmark’s 25 offices were located in majority-white neighborhoods, and inadequate polices were in place to make sure the company provided equal access to Black and Hispanic neighborhoods, according to details in the suit.
The company, headquartered in Jackson, Mississippi, has 196 branches across the South and had $16.5 billion in assets at the end of 2020. In recent years, Memphis has been one of the company’s top three markets for home mortgages.
“Trustmark knew its branches were not serving the credit needs of majority-Black and Hispanic areas but did not take steps to address this failure for years,” federal officials alleged in the complaint.
Other similar lenders outperformed Trustmark at a rate of nearly 2.5 times in getting loan applications from Black and Hispanic neighborhoods.
Additionally, about 8.3% of Trustmark’s residential mortgage loans went to Black and Hispanic neighborhoods, compared to about 19% for similar companies.
In a statement to a Dow Jones Newswire reporter, Trustmark President and Chief Executive Duane Dewey said: “We fully cooperated with the agencies and have entered into these settlements to avoid the distraction of protracted litigation. We share the common goals of breaking down barriers to home financing and exploring innovative ways to help residents of underserved areas achieve the dream of homeownership.”
In a press release, the Department of Justice, the U.S. Attorney’s Office for the Western District of Tennessee, the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC) announced an agreement to resolve the allegations brought forth in the suit.
The proposed consent order was filed jointly, also on Friday.
“Enforcement of fair lending laws is a priority for the Civil Rights Division. Our fair lending laws enable us to hold banks and lenders accountable when they fail to serve communities of color in our country. Having fair access to mortgage lending opportunities is the cornerstone on which families and communities can build wealth,” Assistant Attorney General Kristen Clarke of the Civil Rights Division said in a statement. “This settlement makes clear our commitment to ensuring equal access to lending opportunities for all communities, regardless of race or national origin.”
Under the proposed consent order, Trustmark would spend at least $4.4 million to increase credit opportunities in Black and Hispanic neighborhoods, open new offices, develop community partnerships, and pay $5 million in federal penalties.
The initiatives, as outlined in the release, are below:
The Associated Press contributed to this report.
Laura Testino covers education and children’s issues for the Commercial Appeal. Reach her at firstname.lastname@example.org or 901-512-3763. Find her on Twitter: @LDTestino