Compliance Blog

Written by Brandy Bruyere, Regulatory Compliance Counsel

While it is easy to get caught up tracking new regulations like next year’s TILA/RESPA integrated disclosures deadline, sometimes we are reminded that the “oldies but goodies” still need to be on our radar. Earlier this month, New York’s Attorney General filed an action against Evans Bankcorp “for unlawful discrimination on the basis of race in violation of the Fair Housing Act.” The suit claims that since 2009, Evans Bank limited its branching, lending activities, and marketing of credit products to a particular geographic “trade area” in the highly-segregated Buffalo, New York metropolitan area. This was documented by a map that Evans Bank made public as part of its compliance with the Community Reinvestment Act. Here is the map the Attorney General submitted in its suit, which includes Census Data regarding demographics:

This trade area allegedly eliminated approximately 75% of Buffalo’s African-American population from Evans Bank’s lending offerings leading to a disparate impact on African-Americans. The suit also claims that even the bank’s marketing practices excluded the trade area through its advertising campaigns. For example, the suit also alleges that Evans Bank advertised in “ethnic” media sources, but that these were in publications aimed at largely white ethnic communities such as the local Polish community. Meanwhile, the bank performed no advertising in media aimed at the African-American community.

The disparate impact claim relies in large part on data reported by the bank under the Home Mortgage Disclosure Act (HMDA), which showed that out of 1,144 mortgage applications received by Evans Bank between 2009 and 2012, only four applications, or 0.36%, were from African-Americans, and only eight applications were made on properties outside of the bank’s trade area. Compared to other area banks’ HMDA data, Evans Bank’s generated significantly less business from African-American borrowers and borrowers outside the trade area generally.

In response to the lawsuit, Evans Bank issued a statement by email from its CEO to media outlets refuting the attorney general’s claims in the law suit. Rather, the bank stated that it “continue[s] to believe these allegations are without any merit and we intend to vigorously challenge them… We remain confident that our residential lending practices meet all applicable laws and regulations.”

Also in September, the Department of Housing and Urban Development (HUD) settled a complaint against U.S. Bank National Association which alleged that the bank discriminated against a Native American couple in denying a loan refinance. The couple claimed that despite holding full title to their property, the bank denied a loan due because the home was in a Native American reservation. The bank denied any intentional discrimination, but agreed to settle the case. Under the terms of the agreement, the bank will fund the couple’s loan as applied for in May 2013 with no closing costs. The bank and its subsidiary will also as review their policies and procedures for compliance with the Fair Housing Act (FHA) and train employees regarding the Act’s requirements.

Finally, we could see new developments on the FHA and disparate impact cases. The Supreme Court is considering hearing a case out of Texas challenging the FHA disparate impact standard. Should the Court take this appeal, it could lead to big changes in this area of the law. The Court is set to decide today at this term’s opening conference whether to place the case on its docket.

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Caught Napping! Apparently, I toss and turn a lot in my sleep these days which has left my poor husband exhausted. It’s no wonder I caught him napping the other day—and of course, Lemmy was only too happy to get comfortable and join him!