Bank faces penalty, order to increase credit access in alleged redlining activity in Memphis area

Alleging redlining, three federal agencies took action against a Jackson, Miss., bank – with operations in Memphis, Tenn. – and announced Friday a settlement requiring the financial institution to pay a $5 million penalty and $3.85 million to increase mortgage credit access to neighborhoods in the city affected by the discriminatory practice.

The settlement with Trustmark National Bank was initially announced in a nationally televised press conference held by U.S. Attorney General Merrick Garland, who outlined the actions taken by his Department of Justice (DOJ) along with the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC).

According to a CFPB release, the bureau and the DOJ alleged that Trustmark discriminated against Black and Hispanic neighborhoods by “deliberately not marketing, offering, or originating home loans to consumers in majority-Black and Hispanic neighborhoods in the Memphis metropolitan area.” The agencies also alleged that the bank discouraged consumers residing in or seeking credit for properties located in these neighborhoods from applying for credit.

“Trustmark purposely excluded and discriminated against Black and Hispanic communities,” said CFPB Director Rohit Chopra. “The federal government will be working to rid the market of racist business practices, including those by discriminatory algorithms.”

The CFPB said that If entered by the court, the settlement would require the bank to: place $3.85 million into a loan subsidy program administered by the OCC for affected neighborhoods; increase its lending presence there; and implement proper fair lending procedures.

The order would also impose a $5 million civil money penalty (CMP) against the bank. The bureau said the nearly $3.85 million penalty collected by the OCC would be credited “toward the satisfaction of this amount.”

The bank, according to CFPB, has 196 branches in five southern states, with 22 of those branches in the Memphis metropolitan area. The matter arose from an OCC examination of the Mississippi bank that identified potential redlining, resulting in investigations by the CFPB and DOJ, the bureau said.

The complaint by the agencies alleges that Trustmark violated the Fair Housing Act (FHA), the Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B, and the Consumer Financial Protection Act of 2010 (CFPA).

The ECOA and Regulation B, the CFPB said, prohibit creditors from discriminating against applicants and prospective applicants in credit transactions on the basis of characteristics such as race, color, and national origin, including by redlining or engaging in conduct that would discourage on a prohibited basis a prospective applicant from applying for credit.

CFPB, DOJ and OCC Take Action Against Trustmark National Bank for Deliberate Discrimination Against Black and Hispanic Families