FROM: JUSTICE DEPARTMENT
Monday, January 13, 2014
Justice Department Alleges “Buy Here, Pay Here” Used-Car Dealerships Engaged in Illegal Lending Discrimination
Joint Complaint with State of North Carolina Alleges Dealerships in Charlotte, N.C., Targeted African-American Customers for Unfair and Predatory Credit Practices That Violated Federal and State Law
The U.S. Department of Justice, the U.S. Attorney’s Office for the Western District of North Carolina and the North Carolina Department of Justice filed a lawsuit today alleging that defendants Auto Fare Inc., Southeastern Auto Corp. and Zudhi A. Saadeh—the owners and operators of two “buy here, pay here” used-car dealerships in Charlotte, N.C. —violated the federal Equal Credit Opportunity Act by intentionally targeting African-American customers for the extension and servicing of installment sale contracts on unfair and predatory terms. The State of North Carolina also alleges that the defendants’ actions violated the state’s Unfair and Deceptive Trade Practices Act.
The complaint, which was filed today in the U.S. District Court for the Western District of North Carolina, alleges that the defendants engaged in a pattern or practice of “reverse redlining” by targeting African-American customers for installment sale contracts with inflated sales prices, down payments, and interest rates without meaningfully assessing the customers’ credit. The complaint states that Saadeh, who operates Auto Fare and United Car Sales, has used racial slurs to refer to African-Americans and made statements expressing his views that African-American customers have fewer credit options, making them more likely to accept the predatory terms of the contracts offered by the defendants.
The defendants’ practices resulted in rates of default and repossession that are higher than other subprime used-car dealers. The complaint also alleges that the defendants failed to provide customers with a reasonable notice of repossession, repossessed vehicles of customers who were not in default on their contracts, failed to give customers refunds they were due, improperly seized customers’ personal property in repossessed vehicles and used global positioning system devices to locate and repossess vehicles without informing customers that the dealership had installed these devices.
The U.S. Department of Justice, the U.S. Attorney’s Office for the Western District of North Carolina and the North Carolina Department of Justice investigated and filed the lawsuit jointly.
“Intentionally targeting African-Americans for contracts with predatory terms because of their race violates fair lending laws,” said Acting Assistant Attorney General Jocelyn Samuels for the Civil Rights Division. “By filing this lawsuit, the Justice Department is acting to ensure that subprime dealers in the auto industry provide credit in accordance with the law. The Justice Department will continue to ensure that people have equal access to credit, regardless of race.”
“The terms of a person’s loan should not be determined by their race,” said U.S. Attorney Anne M. Tompkins for the Western District of North Carolina. “Predatory lending and illegal discrimination will simply not be tolerated.”
“Charging people inflated prices based on their race isn’t the way to do business in our state,” said North Carolina Attorney General Roy Cooper. “These allegations show outrageous behavior that should be stopped.”
The Civil Rights Division and other agencies involved in this matter are part of the Financial Fraud Enforcement Task Force, established by President Obama to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
A PUBLICATION OF RANDOM U.S.GOVERNMENT PRESS RELEASES AND ARTICLES
Showing posts with label EQUAL CREDIT OPPORTUNITY ACT. Show all posts
Showing posts with label EQUAL CREDIT OPPORTUNITY ACT. Show all posts
Tuesday, January 14, 2014
Sunday, June 3, 2012
JUSTICE-MORTGAGE COMPANY REACH SETTLEMENT OVER LENDING DISCRIMINATION
FROM: U.S. DEPARTMENT OF JUSTICE
Thursday, May 31, 2012
Justice Department Reaches $21 Million Settlement to Resolve Allegations of Lending Discrimination by Suntrust Mortgage Borrowers Were Charged Higher Fees Based on Their Race or National Origin in 2005-2009 Before the Company Implemented New Policies
WASHINGTON – SunTrust Mortgage Inc., the mortgage lending subsidiary of the nation’s 11th-largest commercial bank, has agreed to pay $21 million to resolve a lawsuit by the Department of Justice that it engaged in a pattern or practice of discrimination that increased loan prices for many of the qualified African-American and Hispanic borrowers who obtained loans between 2005 and 2009 through SunTrust Mortgage’s regional retail offices and national network of mortgage brokers.
The settlement also requires SunTrust Mortgage to continue using policies and practices it adopted to prevent discrimination following the time period at issue in the lawsuit.
The settlement, which is subject to court approval, was filed today in federal court in Richmond, Va., where SunTrust Mortgage is headquartered. The settlement comes after a two-and-a-half-year investigation by the Department of Justice, which included reviewing internal company documents and data on more than 850,000 residential mortgage loans SunTrust Mortgage originated between 2005 and 2009. SunTrust Mortgage cooperated fully with the Justice Department’s investigation into its lending practices and agreed to settle this matter without contested litigation.
“Today’s settlement demonstrates that the Department of Justice takes seriously its responsibility to investigate mortgage lending practices during the mortgage boom years and, when the evidence shows the law was broken, to obtain compensation for victims of illegal conduct,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “We will, however, work constructively with responsible lenders like SunTrust Mortgage that are willing to take the necessary steps to ensure equal credit opportunity for all borrowers. We commend SunTrust Mortgage for taking action to implement strong fair lending policies even before they knew the full results of our investigation.”
The settlement was filed in conjunction with the department’s complaint that alleges SunTrust Mortgage violated the Fair Housing Act and Equal Credit Opportunity Act by charging more than 20,000 African-American and Hispanic borrowers higher fees and interest rates than non-Hispanic white borrowers, not based on borrower risk, but because of their race or national origin. Specifically, the allegations involve loans made to African-American borrowers between 2005 and 2008 through the more than 200 retail offices directly operated by SunTrust Mortgage in the Southeastern and Mid-Atlantic portions of the United States. The allegations also involve loans made to African-American and Hispanic borrowers between 2005 and 2009 through SunTrust Mortgage’s national network of mortgage brokers.
“Racial and ethnic bias have no place in the lending market,” said Neil H. MacBride, U.S. Attorney for the Eastern District of Virginia. “We are pleased that SunTrust Mortgage is taking steps to compensate the victims and to ensure fair and equal access to credit in the future.”
SunTrust Mortgage’s business practice during the time periods covered by the lawsuit allowed its loan officers and mortgage brokers to vary a loan’s interest rate and other fees from the price it set based on the borrower’s objective credit-related factors. This subjective and unguided pricing discretion resulted in African-American and Hispanic borrowers paying more.
Prior to the settlement, SunTrust Mortgage had implemented policies that substantially reduced the discretion of its loan officers and mortgage brokers to vary a loan’s interest rate and other fees from the price it set based on the borrower’s objective credit-related factors, and that required the reasons for variations to be documented and reviewed by a supervisor. Those policies, operating in concert with rules imposed by the Federal Reserve in April 2011 and incorporated into the settlement, restrict compensating loan officers and mortgage brokers based on the terms or conditions of a particular loan. Today’s settlement requires SunTrust Mortgage to keep its improved policies in place for at least the next three years, as well as continuing to monitor its lending for signs of discrimination and providing monitoring reports to the United States.
The department’s investigation into SunTrust Mortgage’s lending practices began after a referral by the Board of Governors of the Federal Reserve to the Justice Department’s Civil Rights Division in December 2009 for potential patterns or practices of discrimination. SunTrust Mortgage’s parent company, Atlanta-based SunTrust Bank, is a member of the Federal Reserve System, and one of the nation’s largest regional banks with $178 billion in assets and more than 1,600 branches in seven states and the District of Columbia.
“Racial or other illegal discrimination has no place in our credit markets,” said Federal Reserve Board Governor Elizabeth A. Duke. “We are pleased that this settlement is designed to ensure fair access to credit.”
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF). President Obama established the interagency FFETF to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
The proceeds of the settlement will be used to compensate the victims of SunTrust Mortgage’s discrimination, who were located in 34 states and the District of Columbia when the discrimination occurred. The proposed settlement provides for an independent administrator to contact and distribute payments of compensation at no cost to borrowers whom the Justice Department identifies as victims of SunTrust Mortgage’s discrimination. Borrowers who are eligible for compensation from the settlement will be contacted by the administrator.
Wednesday, April 4, 2012
JUSTICE ALLEGES MORTGAGE BANKER CHARGED HIGHER RATES & FEES TO AFRICAN-AMERICANS AND HISPANICS
FROM: U.S. DEPARTMENT OF JUSTICE
Monday, April 2, 2012
Justice Department Alleges GFI Mortgage Bankers Engaged in Illegal Lending Discrimination Complaint Alleges New York-Based Company Charged Higher Interest Rates and Fees to African-American and Hispanic Borrowers
WASHINGTON – The Department of Justice and the U.S. Attorney’s Office for the Southern District of New York filed a lawsuit alleging that GFI Mortgage Bankers Inc., a mortgage banker with operations in seven states, violated federal fair lending laws by charging African-American and Hispanic borrowers higher interest rates and fees on home mortgage loans because of their race or national origin, not based on their creditworthiness.
The complaint, filed today in the Southern District of New York under the federal Fair Housing Act and Equal Credit Opportunity Act, alleges that GFI engaged in a pattern or practice of discrimination on the basis of race and national origin by charging African-American and Hispanic borrowers higher interest rates and fees on home mortgage loans compared to similarly-situated white borrowers. The Department of Justice and the U.S. Attorney’s Office for the Southern District of New York investigated and filed the lawsuit jointly.
“Charging people more for home loans simply because of their race or national origin – as we have alleged in our complaint against GFI – is illegal. The Justice Department will act aggressively to ensure that all people have equal access to credit and a level playing field ,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “For that reason, vigorous enforcement of fair lending laws remains a top priority.”
U.S. Attorney for the Southern District of New York Preet Bharara said, “As the lawsuit we filed today alleges, discrimination still exists in certain quarters and it has profound consequences for the victims. At a time when so many American homeowners of all races and nationalities are struggling to make their mortgage payments, it is unacceptable that, as we allege, the impact of GFI Mortgage’s business practices resulted in its African-American and Hispanic customers paying higher fees and interest rates for their residential mortgages. As today’s suit demonstrates, this type of discriminatory action will not be tolerated. We will continue to work to ensure that fair lending laws are enforced throughout the district.”
“HUD and the Justice Department work together to end lending discrimination in America. This case and others nationwide demonstrate our commitment to pursue lenders if they violate the Fair Housing Act and seek relief for discrimination victims,” said Department of Housing and Urban Development (HUD) Assistant Secretary for Fair Housing and Equal Opportunity John TrasviƱa.
From 2005 through at least 2009, GFI charged higher loan prices to African-American and Hispanic borrowers than it charged to similarly-situated white borrowers by charging higher interest rates and fees for home mortgage loans. For example, an African-American borrower who took out a home mortgage loan in 2007 paid on average approximately $7,500 more over the first four years of the loan than a similarly-situated white borrower. For a Hispanic borrower, the difference was approximately $5,600 more over the first four years of the loan than a similarly-situated white borrower. The disparities, based on race or national origin, are statistically significant, and are unrelated to credit risk or loan characteristic.
During the period when the discrimination occurred, GFI had a policy or practice of allowing and encouraging its loan officers in New York and New Jersey to promote loan products, price loans and charge fees in a manner that was unrelated to credit risk or loan characteristics. GFI knew that its loan officers priced loans in ways unrelated to a borrower’s creditworthiness, resulting in thousands of dollars in overcharges for African-American and Hispanic borrowers based on their race or national origin. By providing its loan officers a substantial percentage of the profits generated on each loan, GFI’s compensation scheme provided strong financial incentives to loan officers to price their loan products in a discriminatory manner. Moreover, GFI failed to supervise, train, or adequately monitor its loan officers to ensure that they were pricing loans in a non-discriminatory manner.
During the period when the discrimination occurred, the number of home mortgage loans issued by GFI increased from 974 in 2005 to 2,270 in 2009. At the same time, GFI’s revenue from its home mortgage loan services increased from $305 million in 2005 to $768 million in 2009.
This case resulted from a referral by HUD to the Justice Department’s Civil Rights Division in 2010.
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