BancorpSouth to pay more than $10M in racial discrimination suit - Montgomery Alabama news.

BancorpSouth to pay more than $10M in racial discrimination suit

(Source: Flickr Creative Commons) (Source: Flickr Creative Commons)

BancorpSouth has agreed to pay more than $10 million to settle a lawsuit accusing the company of not giving loans or charging higher rates to minorities.

The Justice Department and Consumer Financial Protection Bureau (CFPB) reached the settlement with BancorpSouth over allegations that the bank discriminated against several racial groups in the Mid-South.

The CFPB and Justice Department made claims that BancorpSouth denied services to a consumer based on racial demographics of the neighborhood where the consumer lived.

They also claimed BancorpSouth discriminated against African-American applicants in the pricing of their mortgage loans and required its employees to treat applications differently based on race or other prohibited characteristics. This is known as “redlining.”

These allegations came from locations in the Memphis area as well as areas in Arkansas and Mississippi.

As part of the settlement, BancorpSouth agreed to pay nearly $7 million in relief for the affected people and neighborhoods; invest in at least $800,000 in advertising, outreach, and community partnership efforts; pay a $3 million civil penalty; and amend its policies, standards, and training.

“When banks discriminate on the basis of race, they violate our civil rights laws and threaten the foundation of a fair economy,” Principal Deputy Assistant Attorney General Vanita Gupta said. “The Civil Rights Division will continue to enforce our nation’s fair lending laws to ensure that qualified applicants and borrowers can access credit and invest in their financial future without facing unlawful barriers.”

The discrimination complaint stems from actions in 2011 to 2013. It states BancorpSouth, in addition to “redlining,” took place in “underwriting.” Underwriting means loan officers were given limited standards to ensure mortgage loans were consistently priced. According to the complaint, this caused the bank to be able to deny African-American mortgage loans or charge significantly higher rates to African-American borrowers than white borrowers.

In an audio recording from 2012, a BancorpSouth manager told loan officers that applications from minorities and others who the bank viewed as “protected class members” must be turned down within 21 days. Several racially insensitive comments followed by laughter were also recorded.

However, BancorpSouth said the settlement does not mean they have admitted to any of the allegations.

“We believe this settlement is a positive development for the Bank, and is in the best long-term interest of our customers, employees, and shareholders,” BanCorpSouth Chairman and CEO James D. Rollins III said in a statement.

The bank said they have taken a number of steps to maintain fairness and consistency since 2012. They said the settlement allows them to help serve communities:

The settlement is an opportunity for the Bank to avoid protracted litigation with the DOJ and CFPB, and to instead devote additional resources to continue serving the communities in which it operates, including helping meet the credit needs of all borrowers in those communities.

The bank has hired a new Director of Community Lending, Chief Fair Lending Officer, and Community Development Lending Manager as well as opened a new branch in Memphis in hopes to strengthen their ability to provide a system of fair loans.

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