Bank of America resolves discrimination lawsuit with $335 million payout
Countrywide branch accused of unfairly charging higher rates to African-Americans, Hispanics
Bank of America has agreed to pay $335 million to resolve allegations
that its Countrywide unit engaged in discrimination against qualified
African-American and Hispanic borrowers on home loans. The settlement
with the U.S. Justice Department was filed this week with the Central
District court of California and is subject to court approval. It's the
largest settlement in history over residential fair lending practices.
According to the complaint, these borrowers were charged higher fees and rates due to their race or national origin rather than any other objective criteria.
"These institutions should make judgments based on applicants' creditworthiness, not on the color of their skin," Attorney General Eric Holder says. "With today's settlement, the federal government will ensure that the more than 200,000 African-American and Hispanic borrowers who were discriminated against by Countrywide will be entitled to compensation."
Bank of America Corp. bought the nation's largest subprime lender, Countrywide Financial Corp. in 2008.
"We discontinued Countrywide products and practices that were not in keeping with our commitment and will continue to resolve and put behind us the remaining Countrywide issues," Dan Frahm, a Bank of America spokesman said.
The complaint states that Countrywide was aware that the fees and interest rates that its loan officers were charging discriminated against African-American and Hispanic borrowers, but failed to impose meaningful limits or guidelines to stop it.
"Our research shows that among borrowers with strong credit scores, African American households were more than three-times as likely to be pushed into one of these high-cost subprime loans than were white households," Mike Calhoun, head of the Center for Responsible Lending said.
"Such conduct undercuts the notion of a level playing field for all consumers," Attorney General Eric Holder said at a press conference. "Under this administration, these harmful and discriminatory practices simply will not be tolerated," said Holder.
A Bank of America spokesman is quick to emphasize the alleged discrimination happened before the company acquired Countrywide and adds Bank of America is committed to "fair and equal treatment" of all its customers.
The complaint alleges that by steering borrowers into subprime loans from 2004 to 2007, Countrywide harmed those qualified African-American and Hispanic borrowers. Subprime loans generally carried costlier terms, such as prepayment penalties and significantly higher adjustable interest rates that increased suddenly after two or three years. These practices made the payments unaffordable and left the borrowers at a much higher risk of foreclosure.
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