Justice Department Secures $9 Million Settlement in Redlining Case Involving Washington Trust
The Justice Department has announced a significant development in the fight against lending discrimination, as Washington Trust Company, recognized as the oldest community bank in the United States, has agreed to pay $9 million to resolve allegations of engaging in a pattern of lending discrimination known as redlining.
This legal action is based on accusations that the bank systematically avoided providing credit services to residents of majority-Black and Hispanic neighborhoods in Rhode Island due to their race, color, or national origin.
The Allegations of Redlining
Redlining, an illegal practice, occurs when lenders discriminate against individuals living in communities of color, denying them access to credit services solely because of their racial or ethnic background.
The complaint against Washington Trust alleges that from 2016 through at least 2021, the bank failed to provide mortgage lending services to majority-Black and Hispanic neighborhoods in Rhode Island.
Despite expanding its presence across the state, the bank has never established a branch in a majority-Black or Hispanic neighborhood.
Discriminatory Practices and Lack of Outreach
The complaint further alleges that Washington Trust primarily relied on mortgage loan officers operating exclusively in majority-white areas to generate loan applications.
The bank also purportedly failed to adequately train or incentivize its lending staff or conduct outreach, marketing, and advertising in compensation for its absence in majority-Black and Hispanic neighborhoods.
Compared to other banks over the same six-year period, Washington Trust received significantly fewer loan applications from these communities.
Additionally, even when the bank generated loan applications from majority-Black and Hispanic areas, the applicants themselves were reportedly disproportionately white.
Proposed Consent Order and Remediation Efforts
Under a proposed consent order, subject to court approval, Washington Trust has committed to several remediation efforts, including investing at least $7 million in a loan subsidy fund.
This fund aims to increase access to various home loan options for residents of majority-Black and Hispanic neighborhoods in Rhode Island.
The bank will also allocate $1 million to community partnerships focused on expanding residential mortgage credit access, along with $1 million for advertising, outreach, financial education, and credit counseling tailored to these communities.
Washington Trust plans to open two new branches in majority-Black and Hispanic neighborhoods in Rhode Island and employ at least two mortgage loan officers dedicated to serving these areas.
Further Commitments and Oversight
To ensure the continued development of lending in communities of color, the bank will appoint a Director of Community Lending.
Additionally, Washington Trust has agreed to complete a community credit needs assessment and provide reports on its fair lending program.
Staff will receive training on the bank’s obligations under the consent order. Notably, Washington Trust cooperated with the Justice Department to address the redlining concerns and chose to settle the matter without contested litigation.
Combating Redlining Initiative
The Justice Department launched the Combating Redlining Initiative in October 2021, under the leadership of Attorney General Merrick B. Garland and Assistant Attorney General Kristen Clarke.
This coordinated enforcement effort seeks to combat redlining, a persistent form of discrimination against communities of color.
Since its inception, the initiative has resulted in nine redlining cases and secured $98 million in relief for communities of color affected by lending discrimination nationwide.
Reporting Lending Discrimination
Individuals can report lending discrimination by calling the Justice Department’s housing discrimination tip line at 1-833-591-0291 or submitting a report online. Comprehensive information about fair lending enforcement and a copy of the complaint can be found at www.justice.gov/fairhousing.