Justice Department Reaches Settlement with Charter Bank to Resolve Allegations of Lending Discrimination

The discrimination affected approximately 500 loans made through the bank's branches

Justice Department Reaches Settlement with Charter Bank to Resolve Allegations of Lending Discrimination
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September 29, 2016

The U.S. Department of Justice (USDOJ) has announced that Charter Bank will maintain uniform pricing policies and pay more than $165,000 as part of a settlement to resolve allegations that it engaged in a pattern or practice of discrimination on the basis of national origin.

The settlement, which is subject to court approval, was filed along with the department's complaint in the U.S. District Court for the Southern District of Texas. The complaint alleges that Charter Bank violated the Equal Credit Opportunity Act (ECOA) between 2009 and 2014 by charging higher interest rates to Hispanic borrowers than to similarly situated non-Hispanic borrowers on vehicle-secured consumer loans.

According to the Justice Department, the discrimination affected approximately 500 loans made through the bank's branches. A vehicle-secured consumer loan allows a customer to borrow from the bank by tapping the equity in a car the customer already owns. The USDOJ complaint alleges that the discrimination occurred because Charter gave its employees discretion to adjust interest rates upward or downward by approximately three percentage points, which was not based on the borrower's credit risk.

"Lending practices that discriminate against customers because of their national origin violate the law and threaten the foundation of a free and fair economy," said Principal Deputy Assistant Attorney General Vanita Gupta, head of the Justice Department's Civil Rights Division. "Working families rely on access to credit to borrow money so they can meet the demands of their daily lives. This settlement will ensure Charter Bank complies with the law, provides relief to consumers and safeguards against discrimination going forward."

"Fair lending by banks, regardless of national origin, is guaranteed by law," said U.S. Attorney Kenneth Magidson of the Southern District of Texas. "This case involving Charter Bank shows our commitment to ensure its reality."

The lawsuit against Charter Bank originated from a 2014 referral by the Federal Deposit Insurance Corporation (FDIC) to the Justice Department's Civil Rights Division. Charter is regulated by the FDIC.

Under the terms of the settlement, Charter Bank will pay $165,820 to Hispanic victims of discrimination, monitor its loans for potential disparities based on national origin and provide equal credit opportunity training to its employees. Prior to the settlement, Charter revised its loan pricing policies to include objective, non-discretionary and non-discriminatory standards for determining interest rates for consumer loans. This settlement requires Charter to maintain the revised policies for at least four years.

The Justice Department's enforcement of fair lending laws is conducted by the Civil Rights Division's Housing and Civil Enforcement Section. Since 2010, the Civil Rights Division has provided over $1.5 billion in monetary relief for individual borrowers and impacted communities through its enforcement of the Fair Housing Act, ECOA and Servicemember's Civil Relief Act.

Additional information about fair lending enforcement by the Justice Department can be found on the department's website.