DOJ Files Complaint Against Credit Union for Alleged Redlining

Redlining has been a major focus of the Biden Administration, with the Department of Justice (DOJ) launching its “combatting redlining initiative” in 2021. Through this initiative, federal regulators like NCUA are encouraged to refer potential redlining cases to the DOJ for potential enforcement actions. According to a recent DOJ press release, this initiative has resulted in 14 redlining resolutions since 2021 and over $144 million paid by financial institutions as relief for affected communities. The combatting redlining initiative encourages NCUA to refer potential redlining cases to the DOJ, and cases involving violations of the Fair Housing Act could be referred to the Department of Housing and Urban Development (HUD) as well. 

Since the launch of the combatting redlining initiative, the DOJ has brought redlining cases based on statistical data rather than on overt evidence of discrimination. When deciding to bring a redlining case, the DOJ will look at the lending areas serviced by the institution, and compare the institution’s statistical data to that of its peers. To that end, on October 10, 2024, the DOJ filed a complaint and consent order against Citadel FCU (Citadel) over alleged redlining practices. 

The complaint alleges the following conduct:

• Failure of Citadel FCU to open branches in Philadelphia County or any area with a majority Black or Hispanic population
  
  • All but one of Citadel’s branches operated in a majority-white area.
• Failure to produce documents and advertisements in Spanish
• Failure to maintain adequate policies and procedures to monitor fair lending compliance
• Failure market or advertise to market to majority-Black or Hispanic neighborhoods
• Received disproportionately lower home loan applications from majority-Black or Hispanic neighborhoods and made disproportionately lower home loans from majority-black or Hispanic neighborhoods
  
  • Here the DOJ compares Citadel’s numbers against its peer lenders.

For more detailed information, credit unions may want to read the complaint in its entirety. 

The consent order requires Citadel to take the following actions:

• Citadel, its employees, and agents will not discriminate in violation of the FHA and ECOA
• Citadel will create and submit a community credit needs assessment and a remedial plan
• Hire a qualified third-party consultant to conduct a detailed assessment of Citadel's fair lending program and draft a fair lending status report and compliance plan
• Provide fair lending training and distribute the complaint and consent order to all employees involved with mortgage lending, marketing, or fair lending
• Hire a community lending officer and chief compliance officer
• Open or acquire three additional full-service branches located in majority-Black and Hispanic census tracts in Philadelphia County
• Provide loan documents and assistance in Spanish
• Invest a minimum of $6,000,000 in a loan subsidy fund
• Spend at least $270,000 on advertising geared toward majority-Black and Hispanic census tracts

Credit unions may want want to review the consent order, as it contains far more details on what is required of Citadel.

What credit unions may want to note is that what you are not doing is just as important as what you are doing. In light of this complaint credit unions may want to review the location of their branches and loan production offices to determine if there are any areas or neighborhoods that are currently being underserved by the credit union. Additionally, credit unions should look at their marketing campaigns to determine where they are reaching out to and whether there are any neighborhoods or communities that are being left out of a marketing campaign. 

Ultimately, redlining cases are highly fact specific and based on statistics that a credit union may not be aware of. As such, it is important that credit unions have robust fair lending policies and procedures to ensure that none of their members are unintentionally left out.