USA Sues Texas Bank for Lending Bias

DALLAS (CN) – Federal prosecutors claim Texas-based First United Bank discriminated against hundreds of Hispanic borrowers based on their national origin.
     The United States sued First United Bank on Thursday in Federal Court.
     Based in Dimmitt, the bank is a subsidiary of Plains Bancorp and has 15 branches, in Lubbock, Amarillo and Wichita Falls. It has total assets of $1.18 billion.
     Prosecutors say the bank did not have a uniform pricing system or specific pricing guidelines for its loan officers on unsecured consumer loans before May 2013.
     “Loan officers had broad subjective discretion to set interest rates,” the complaint states. “Between January 1, 2008, and December 31, 2012, First United made approximately 560 unsecured consumer loans to Hispanic borrowers. During this period, First United charged interest rates to Hispanic borrowers for unsecured consumer loans that were 205 basis points higher, on average, than the rates charged to non-Hispanic borrowers. This disparity is statistically significant.”
     Rates for Hispanic borrowers were 142 basis points higher when accounting for credit risk factors such as loan terms and credit scores, the complaint states.
     Prosecutors blame the bank for not properly training loan officers to treat customers without regard to their national origin and failing to monitor their performance to ensure compliance with fair lending laws.
     “First United’s policy or practice of giving its employees broad subjective discretion in handling every aspect of the unsecured consumer loan transaction had a disparate detrimental impact on Hispanic borrowers compared to similarly-situated non-Hispanic borrowers and is not justified by business necessity or legitimate business interests,” the complaint states.
     First United did not immediately respond to a request for comment Friday afternoon.
     Uncle Sam seeks declaratory judgment and damages for violations of the Equal Credit Opportunity Act.

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