Tag Archives: Justice Dept

Cadence Bank to pay $8.5 million to settle claims of redlining

The Justice Department has announced a settlement with Houston-based Cadence Bank to resolve allegations that the bank engaged in lending discrimination by ‘redlining’ predominantly Black and Hispanic neighborhoods in the Houston area.

The Justice Department alleged that the bank engaged in redlining between 2013 and 2017 by avoiding providing loans and other home mortgage services in majority-Black and Hispanic neighborhoods.

In 2018, the Houston Metropolitan Statistical area had over 7 million residents. The region was 37.6 percent Hispanic, 35.5 percent White and 17 percent non-Hispanic Black. 52 percent of the census tracts were majority-Black and Hispanic.

Branches in majority-white areas

From 2013 to 2017, 12 of the 13 branches that Cadence operated were located in majority-white neighborhoods. The remaining branch was in downtown Houston and mainly served commuters. In 2017, the downtown area became majority-white due to demographic change.

Cadence relied on its loan officers to generate loans. All, except the downtown branch, had at least one loan officer assigned to them. None of the loan officers spoke fluent Spanish, nor did the bank provide training to serve the credit needs of the majority-Black and Hispanic areas. The bank did not advertise at all in Spanish.

Of the nearly 1,600 mortgage applications that Cadence generated in that period, 14 percent came from majority-Black and Hispanic areas. In contrast, similar-sized peers in the Houston area generated 36 percent of their applications from the same areas.

As a depository bank, Cadence is subject to the requirements of the Community Reinvestment Act which requires most banks to meet the credit needs of the communities that they serve. In the case of Cadence that’s Harris, Fort Bend and Montgomery counties.

The regulator initiated an examination of the Bank’s practices in October 2017.

Penalties

Cadence will pay

  • $3 million fine
  • $4.17 million to create a loan subsidy fund for residents of predominantly Black and Hispanic neighborhoods in Houston
  • $750,000 for development of community partnerships to provide services to increase access to mortgage credit in these areas
  • $625,000 for advertising, consumer financial education and credit repair initiatives.

The bank is also required to dedicate at least four mortgage loan officers to majority-Black and Hispanic neighborhoods and open a new branch in one of these neighborhoods. It will also hire a Director of community lending to oversee these efforts and work with the bank’s leadership.

Merger transaction

In April, Cadence announced that it would merge with BanCorpSouth, based in Tupelo, Mississippi in a $6 billion all-stock transaction. The deal is expected to close later this year.

Cadence entered settlement negotiations with the Department of Justice, with the consent and support of BancorpSouth.

https://www.justice.gov/opa/pr/justice-department-and-office-comptroller-currency-announce-actions-resolve-lending

 

Retailer settles with Justice Dept for charging military excess interest

Conn’s Inc, the electronics and furniture retailer, has settled with the Justice Department to resolve allegations that they violated the Servicemembers Civil Relief Act (SCRA) by charging at least 184 servicemembers excess interest on their purchases.

Conn’s has 143 stores in 14 states. It has its head office in The Woodlands. For the year ended 31 January 2020, the company had revenues of $1.5 billion. A quarter of this comes from finance charges.



Under the SCRA, military members can be charged no more than 6% interest on retail installment contracts.

Sergeant Sargent

In May 2018, a Sergeant called Travon Sargent, with the Oklahoma National Guard received orders to deploy to Fort Hood the following month. Under the terms of the act, he was eligible for the 6% interest rate as soon as he received his orders. Conn’s kept charging him 21% interest despite repeated requests from his wife. They eventually reduced it to 6%. However, they only backdated it to June 2018 and not the date he received his orders.

However the November statement sent to Sergeant Sargent listed the interest rate as 21%. So, in December 2018, a United States Army Staff Judge Advocate wrote to Conn’s asking for confirmation that the interest rate had been reduced to 6%. The Conn’s legal department never responded.

The investigation

Justice Department began an investigation in March 2019. Conn’s admitted that 185 servicemembers, who applied between March 2014 and May 2019, did not receive the full SCRA benefits. Conn’s written policy and procedures on SCRA had clauses and restrictions that are not part of the SCRA. One example was that Conn’s required at least one payment on account before entry on active duty in order to get the 6% interest rate.

Conn’s has issued $59,216 in refund checks and issued credits of $28,589 to 185 servicemembers ($475 average).  It also agreed to pay each servicemember an additional $500 and take steps to instruct the three major credit bureaus to delete negative credit entries that arose from their actions. The company also agreed to pay a $50,000 fine.

https://www.justice.gov/opa/pr/justice-department-settles-texas-based-furniture-and-appliances-chain-charging-servicemembers