RBC’s US bank must pay a $31 million fine for discriminatory mortgage policies
A US bank owned by the Royal Bank of Canada has agreed to pay more than $31 million US for systematically avoiding mortgages in Los Angeles’ predominantly black and Latino communities.
The U.S. Justice Department on Thursday accused Los Angeles-based City National Bank of discrimination by refusing to provide mortgages in predominantly Black and Latino communities, forcing it to pay the fine — the largest redlining settlement in the Department’s history.
City National — a subsidiary of Toronto-based RBC since 2015 — is the latest bank in recent years to systematically avoid lending to racial and ethnic minorities, a practice known as “redlining” that the Biden administration has instituted its own set up a task force to combat.
The Justice Department says City National avoided marketing and mortgages in predominantly black and Latino neighborhoods in Los Angeles County between 2017 and 2020. According to federal officials, other banks operating in those neighborhoods received six times as many mortgage applications as City National.
The term “redlining” derives from the idea that certain neighborhoods have symbolic “red lines” drawn around them by businesses that then avoid offering services in those areas “because of the race, color, or national origin of the residents in those communities,” the Justice Department says.
The Justice Department alleges that City National, a bank with assets of about $95 billion US, has been so reluctant to operate in neighborhoods where most residents are people of color that it has only opened one branch in those neighborhoods in the past 20 years opened. In comparison, City National opened or acquired 11 locations during that period. In addition, none of the employees were committed to getting mortgages at that one branch, unlike branches in predominantly white neighborhoods.
“Redlining is a practice of days gone by, goes against the principles of fairness and justice, and has no place in our economy today,” said Assistant Attorney General Kristen Clarke, who heads the Justice Department’s civil rights division. in a statement. “This settlement should send a strong signal to the financial industry that we expect lenders to serve all members of the community and will be held accountable if they fail to do so.”
Attorney General Merrick Garland has prioritized civil rights prosecutions since he took over at the Justice Department in 2021, and the Department, in the Biden administration, has given a higher priority to redlining cases than under previous governments.
The Biden task force includes both the Justice Department and banking regulators such as the Comptroller of the Currency and the Consumer Financial Protection Bureau, and focuses not only on explicit forms of redlining, but also on cases where computer algorithms can lead banks to black and Latino borrowers.
Despite half a century of laws designed to combat redlining, the racist practice continues across the country and the long-term effects are still felt to this day. The median wealth of a black family is a fraction of that of a typical white household, and homes in historically defined neighborhoods are still worth less than homes in undefined communities.
As part of the settlement, City National will create a $29.5 million loan grant fund for loans to black and Latino borrowers, and spend $1.75 million on advertising, community outreach and financial education programs to reach minority borrowers.
In a statement, City National said it disagreed with the Justice Department’s allegations, but “nevertheless supports the DOJ in its efforts to ensure equal access to credit for all consumers, regardless of race.”
The Justice Department said City National was cooperating as part of their redlining investigation and is also working to address the issues in other markets.
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