AIG Units Settle Racial Bias Complaint

WILMINGTON, Del. (CN) - Two units of AIG will pay $6.1 million to settle a racial discrimination mortgage lending complaint with the Department of Justice. Prosecutors said that AIG Federal Savings Bank and Wilmington Finance allowed third-party brokers to charge black borrowers more than white ones nearly 180,000 times from 2003 to 2006.

The defendants agreed to pay $6.1 million for violations of the Fair Housing and the Equal Credit Opportunity Acts, prosecutors said in the consent order.

The third-party brokers earned compensation in two ways: through yield spread premiums paid by the defendants and by direct fees paid by the borrowers.

Because the defendants failed to monitor or supervise the brokers, they were able to charge black borrowers nationwide significantly more than white ones.

The defendants deny any wrongdoing; the settlement requires court approval.

"Discriminatory practices by lenders, brokers, and other players in the mortgage market contributed to our nation's housing crisis and economic meltdown. Lenders who looked the other way and ignored the discriminatory practices of brokers must be held accountable," Thomas E. Perez, Assistant Attorney General in charge of the Justice Department's Civil Rights Division, said in a statement.

"Today's settlement is significant because it marks the first time the Justice Department has held a lender responsible for failing to monitor its brokers to ensure that borrowers are not charged higher fees because of their race."

As part of the $ settlement, AIG Federal Savings Bank and Wilmington Finance will also have to invest at least $1 million in consumer financial education programs for black consumers.

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