National City Bank systematically charged black and Hispanic borrowers more in interest and fees on mortgages from 2002 through 2008, federal investigators found, and now PNC Financial Services Group will pay $35 million to make up for it.
A two-year Consumer Financial Protection Bureau probe of Cleveland-based National City's lending portfolio, revealed Monday, found that the bank charged around 0.1 percentage point more on loans to 75,000 black and Hispanic borrowers. That added an average of $160 per year to payments.
The price bump was independent of the borrower's credit score or the length of the loans, according to a complaint filed in the case, meaning that whites got annual percentage rates 0.1 percent lower than minorities with the same risk factors.
The disparity averaged slightly less than 0.1 percentage point for Hispanic borrowers, and slightly more than 0.1 percentage point for black borrowers. The practice violated the Fair Housing Act and the Equal Credit Opportunity Act, the Department of Justice alleged.
"This case marks the Justice Department's latest step to protect Americans from discriminatory lending practices, and shows we will always fight to hold accountable those who take advantage of consumers for financial gain," Attorney General Eric Holder said in a news release.
PNC bought National City in 2009.
"This settlement puts to rest allegations associated with the residential mortgage lending of National City Bank prior to its acquisition by PNC," according to a statement issued by PNC. "Once PNC acquired National City Bank, we took steps to improve policies and procedures governing the mortgage lending business of National City, discontinue National City's mortgage broker channel, and discontinue certain practices reviewed by the agencies."
Department of Justice attorneys simultaneously filed a complaint against National City and a consent order resolving it. The order requires court approval.
"This settlement addresses a serious failure by National City to protect potential homebuyers from discriminatory lending practices," U.S. attorney David J. Hickton said in the statement.
In the consent order, PNC neither admitted nor denied the alleged discriminatory practices.
The bank and a settlement administrator will try to find the borrowers, and will split the proceeds, on a per-loan basis, among those who can be found. The borrowers will have to sign releases to collect shares of the funds.
If there are funds left over, they will go to organizations that provide credit and housing counseling, and other services, to black and Hispanic homebuyers.
Rich Lord: firstname.lastname@example.org, 412-263-1542 or on Twitter @richelord.
Rich Lord: email@example.com or 412-263-1542. Twitter: @richelord. First Published December 23, 2013 2:40 PM