City National Bank settles lending discrimination suit in LA County

City National Bank has agreed to commit more than $31 million to boost lending to Black and Latino home buyers in Los Angeles County to settle a federal government lawsuit accusing it of lending discrimination, the U.S. Department of Justice announced Thursday.

The agreement, which is part of the DOJ’s nationwide Combating Redlining Initiative that Attorney General Merrick B. Garland launched in October 2021, represents the largest redlining settlement in its history. City National is the largest bank headquartered in Los Angeles and among the 50 largest banks in the United States.

Redlining is an illegal practice in which lenders avoid providing credit services to individuals living in communities of color because of the race, color or national origin of the residents in those communities.

A City National representative could not immediately be reached for comment. However, the Justice Department said the bank worked cooperatively with the department to remedy the redlining allegations. In conjunction with the settlement, the bank announced it is proactively taking steps to expand its lending services in other markets around the country to provide greater access to credit in communities of color.

A complaint filed in Los Angeles federal court Thursday alleges that from 2017 through at least 2020, City National avoided providing mortgage lending services to majority-Black and Latino neighborhoods in Los Angeles County and discouraged residents in these neighborhoods from obtaining mortgage loans.

Under the proposed consent order, which is subject to court approval, City National Bank has agreed to:

— Invest at least $29.5 million in a loan subsidy fund for residents of majority-Black and Latino neighborhoods in Los Angeles County; at least $500,000 for advertising and outreach targeted toward the residents of these neighborhoods; at least $500,000 for a consumer financial education program to help increase access to credit for residents; and at least $750,000 for development of community partnerships to provide services that increase access to residential mortgage credit;

— Open one new branch in a majority-Black and Latino neighborhood and evaluate future opportunities for expansion within Los Angeles County; ensure at least four mortgage loan officers are dedicated to serving majority-Black and -Latino neighborhoods; and employ a full-time community lending manager who will oversee the continued development of lending in majority-Black and Latino neighborhoods; and

— Conduct a community credit needs assessment, a research-based market study, to help identify the needs for financial services for majority-Black and Latino census tracts within the county.

The announcement was made by Kristen Clarke, assistant attorney general for the DOJ’s civil rights division, at the historic Second Baptist Church in Los Angeles, where the Rev. Dr. Martin Luther King preached one of his final sermons before his assassination a few days later on April 4, 1968.

“Through this agreement, we are sending a strong message to the financial industry that we will not stand for unlawful barriers in residential mortgage lending,” Clarke told reporters. “We will not stand for unlawful modern-day redlining. We will not stand for economic injustice that denies Black and Hispanic communities access to the American dream of owning a home and strips them of the ability to generate wealth that might benefit future generations.”

The complaint also alleges that during that time period other banks received more than six times as many applications in majority-Black and Latino neighborhoods in Los Angeles County than City National each year.

In addition, City National only opened one branch in a majority-Black and Latino neighborhood in the past 20 years, despite having opened or acquired 11 branches during that time period, the DOJ said. Unlike at its branches in majority-white areas, City National did not assign any employee to generate mortgage loan applications at that branch, according to the DOJ.

“Fifteen months after I vowed that the Justice Department would be aggressively stepping up our efforts to combat discriminatory practices in the housing market, we have today secured the largest redlining settlement in Department history,” Garland said in a statement.

“So far, the Combating Redlining Initiative has secured over $75 million dollars in relief for communities that have suffered from lending discrimination. The Justice Department will continue to build on our efforts to vigorously enforce federal fair lending laws and work to ensure that financial institutions 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, and to the pursuit of justice for all Americans.”

Updated Jan. 12, 2022, 12:07 p.m.