By Jonathan Stempel
(Reuters) -City National Bank, a unit of Royal Bank of Canada, agreed to commit more than $31 million to boost lending to Black and Hispanic home buyers in the Los Angeles area, in the U.S. Department of Justice’s largest settlement over illegal redlining.
Thursday’s settlement was part of Attorney General Merrick Garland’s Combatting Redlining Initiative, launched in Oct. 2021 to combat housing discrimination.
The Justice Department accused City National of violating the federal Fair Housing Act by having “avoided” serving majority-Black and majority-Hispanic neighborhoods in the Los Angeles area between 2017 and 2020.
City National, the largest bank based in Los Angeles, was accused of letting staff generate loan applications largely from its disproportionately white customer base instead of reaching out to Black and Hispanic people, and ignoring internal reports that suggested shortcomings in its fair lending practices.
The complaint said just 7% of City National’s residential mortgage loans in the region went to residents of majority-Black and Hispanic census tracts, compared with 44% of loans by its peers, and that more loans in those tracts went to white people.
Under a five-year consent order, City National will commit at least $29.5 million, with the goal of making mortgage and home improvement loans more widely available in majority-Black and Hispanic neighborhoods.
The bank will also improve training, spend at least $1.75 million on advertising, community programs and financial education, and set up a fair lending oversight committee.
Garland said the Justice Department is trying to vigorously enforce fair lending laws and ensure that lenders “provide equal opportunity for every American to obtain credit. In advance of what would have been Dr. Martin Luther King Jr.’s 94th birthday, it is a fitting time to reaffirm our commitment to that work.”
City National, with $95.3 billion of assets, denied wrongdoing, but said it settled to avoid prolonged litigation.
“We disagree with the allegations, but nonetheless support the DOJ in its efforts to ensure equal access to credit for all consumers, regardless of race,” it said in a statement.
(Reporting by Jonathan Stempel in New York; Editing by Andrea Ricci and Marguerita Choy)