On January 19, DOJ and a community bank entered into a consent order to resolve allegations of discriminatory lending practices under the ECOA. DOJ asserted the bank’s student loan refinance program engaged in practices that disproportionately discouraged and denied refinancing to Black and American Indian/Alaska Native graduates based on a policy which excluded graduates from schools with higher default rates. These exclusions allegedly affected graduates from historically Black colleges and universities and other majority-Black institutions in disproportionate numbers.
The order noted no findings or adjudications were made in the case and, in settling the matter, the bank denied the DOJ’s allegations. The settlement requires the bank to establish a $1.3 million settlement fund to compensate individuals who were allegedly affected by these practices. Additionally, the bank must allocate at least $200,000 towards a consumer financial education program aimed at students and graduates of schools previously deemed ineligible under the policy.
The consent order also mandated changes to the bank’s lending policies and procedures, including (i) the elimination of the policy that excluded graduates of certain institutions from eligibility, (ii) the implementation of fair lending training for relevant staff, and (iii) the enhancement of compliance and monitoring systems. The order is effective for a period of three years.
