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City National Bank will pay $31 million to settle DOJ’s redlining case

Between 2017 and 2020, City National approved over 6,000 loans in the LA area. Just 7% of them were in majority-Black and Latino census tracts.

LOS ANGELES (CN) — City National Bank, the largest bank headquartered in Los Angeles, has agreed to pay more than $31 million to settle claims it engaged in illegal "redlining" — discrimination against loan applicants based on the their race or the racial makeup of their neighborhood — from 2017 through at least 2020. According to the U.S. Department of Justice, it is the largest redlining settlement in history.

"City National avoided providing home loans and other mortgage services in majority-Black and Hispanic neighborhoods in the Los Angeles Metropolitan Division," the complaint, filed on Thursday by the U.S. Department of Justice, says. "City National Bank’s conduct and practices were intended to deny, and had the effect of denying, residents of majority-Black and Hispanic neighborhoods equal access to home loans and otherwise discouraged these residents from applying for home loans."

According to the consent order, also filed Tuesday, City National Bank, a subsidiary of the Royal Bank of Canada, admits no wrongdoing and "maintains that it was in compliance with applicable law at all times, but seeks to resolve this matter in order to avoid prolonged litigation." In a statement, a spokesman for the bank also said: "We disagree with the allegations, but nonetheless support the DOJ in its efforts to ensure equal access to credit for all consumers, regardless of race."

Under the terms of the agreement, City National Bank "will invest a minimum of $29,500,000 in a loan subsidy fund" for majority-Black and Latino neighborhoods in Los Angeles. The fund will go to subsidizing home mortgage, home improvement and home refinance loans. The bank also agreed to spent at least $500,000 to advertise the program, at least $500,000 for a consumer financial education program, and at least $750,000 "for development of community partnerships to provide services that increase access to residential mortgage credit."

Among other concessions, the bank agreed to open one new branch in a majority-Black and Latino neighborhood and dedicate at least four mortgage loan officers to serve majority-minority neighborhoods.

Coined in the 1960s, the term "redlining" refers to the practice by banks and other lenders of refusing to approve loans for homes in majority-Black or majority-minority neighborhoods. Redlining was common in the United States from the 1930s well into the 1970s. Following the passage of the Community Reinvestment Act in 1977 as well as other laws, the practice became less widespread. Activists often cite redlining as an example of systemic racism and the need for reparations.

But when most people talk about redlining, they're talking about history — not current events. Which is what makes the complaint against City National Bank all that more startling.

The bank made 6,182 residential mortgage loans in the Los Angeles area from 2017 to 2020, according to the complaint. Just 7% of those loans were made to residents of majority-Black and Latino census tracts. Other banks made 44% of their home mortgages to residents of such neighborhoods — six times as many as City National. And even when the bank did make loans to residents living in majority-minority census tracts, they went, disproportionately, to white residents of those tracts.

"Between 2017 and 2020, City National originated only 113 loans to Black or Hispanic residents of majority-Black and Hispanic tracts, while making 176 loans to white residents of those tracts," the feds say in the complaint.

"It is unacceptable that redlining persists into the 21st century," said U.S. Attorney Martin Estrada in a statement. "Through this agreement, we are taking a major step forward by removing unlawful and discriminatory barriers in residential mortgage lending, and meeting the credit needs in Los Angeles.”

The legal action taken against City National is part of the Department of Justice's "Combating Redlining Initiative." Launched in 2021, it has, according to Attorney General Merrick Garland, "secured over $75 million dollars in relief for communities that have suffered from lending discrimination."

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