Bank Settles Bias Complaint for $1.5M

     ST. LOUIS (CN) - Midwest Bankcentre will pay $1.45 million to settle claims that it discriminated against African-Americans in lending. The government's complaint painted a picture of systematic discrimination.
     The settlement was filed Thursday in Federal Court, immediately after the United States sued the bank.
     Midwest admitted no wrongdoing, but agreed to pay $900,000 in financing to increase credit in majority African-American areas, $300,000 for consumer education and credit repair programs, $250,000 for outreach and $25,000 to compensate the St. Louis Equal Housing Opportunity Council, which investigated the case.
     According to the complaint: "In operating and expanding the scope of its business over time, defendant has acted to meet the credit needs for residential real estate-related loans in predominantly white residential census tracts (with a population greater than 50 percent white) in the Missouri portion of the St. Louis MSA [Metropolitan Statistical Area], and has avoided serving similar credit needs of majority-black census tracts.
     "Defendant has engaged in a race-based pattern of locating branch offices. It has located branch offices in a manner designed to serve the banking and credit needs of the residents of majority-white census tracts, but not those of residents of majority-black census tracts."
     Prosecutors say a study by the Federal Reserve System found that all seven of Midwest's full-service branches in the St. Louis area are in majority-white tracts and that since 1990, Midwest has opened or relocated six full-service branches in majority-white tracts and none in majority-black tracts.
     The government says Midwest knew about its discriminatory practices well before being notified in late 2009 that it was being investigated by the Department of Justice.
     "For three consecutive years beginning in 2004, Midwest employed a consulting firm to analyze its HMDA [Home Mortgage Disclosure Act] data for compliance with CRA [Community Reinvestment Act] and fair housing requirements," the complaint states. "Each of the resulting annual reports stated that Midwest was making a lower portion of its HMDA-reportable loans in majority-minority census tracts than was its peer group, which consisted of seven lenders apparently selected by Midwest and/or its consultant, Phillips and Associated. In 2004, Midwest was informed that while its peer group had made 6.5 percent of its HMDA-reportable loans in minority census tracts, Midwest had made only 1.7 percent of its HMDA-reportable loans in those census tracts. In 2005, Midwest was informed that its peer group had made 7.8 percent of its HMDA-reportable loans in minority census tracts, while Midwest had made only 1.4 percent of such loans in those census tracts. In 2006, Midwest was informed that while its peer group had made 8.9 percent of its HMDA-reportable loans in minority census tracts, Midwest had made only 4.9 percent of its HMDA-reportable loans in those census tracts."
     The government says the racial disparity extended to Midwest's real estate loans. From 2004 to 2008, Midwest generated 2,250 single family residential loan applications, but only 61 (2.7 percent) were received from majority-black tracts, compared to 10.7 percent from comparable lenders during that time period.
     Midwest has seven full-service branches and four partial-service branches in the St. Louis area.