The U.S. Department of Justice (DOJ) announced its first redlining settlement with a credit union in its $6.5 million agreement with the $6 billion-assets Citadel Federal Credit Union.
The DOJ alleged that Citadel failed to provide mortgage lending services to predominantly Black and Hispanic neighborhoods in and around Philadelphia from at least 2017 through 2021. The credit union also allegedly discouraged people in those communities from obtaining home loans.
The complaint further alleges that Citadel’s branches are located almost exclusively in majority-White neighborhoods, with no branches in Philadelphia, which contains more than 75% of the predominantly Black and Hispanic neighborhoods and 34% of the total population in Citadel’s market area. In comparison, Citadel’s rival lenders generated mortgage applications in predominately Black and Hispanic neighborhoods at nearly three times the rate of the credit union.
Under the proposed consent order, which is subject to court approval, Citadel will invest at least $6 million in a loan subsidy fund to increase access to home mortgage, home improvement and home refinance loans for residents of majority-Black and Hispanic neighborhoods in Philadelphia. It will also spend at least $250,000 on community partnerships to provide services related to credit, consumer financial education, homeownership and foreclosure prevention for residents of the impacted communities, and it will spend at least $270,000 for advertising, outreach, consumer financial education and credit counseling focused on these communities. It will also open three new branches in predominantly Black and Hispanic neighborhoods in Philadelphia and hire a community lending officer who will oversee the continued development of lending in communities of color.
“This redlining settlement marks the Justice Department’s very first resolution involving a credit union, making clear our intent to hold all types of lenders accountable for their role in modern-day redlining,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “There are well over 4,600 credit unions across America, all subject to federal laws that prohibit redlining and lending discrimination. Redlining and other forms of lending discrimination harm communities of color and families by denying them an equal opportunity to access credit, attain the dream of homeownership and build generational wealth. This settlement will expand investment in Black and Hispanic communities, particularly in Philadelphia, and increase opportunities for homeownership and financial stability. Residents of communities harmed by unlawful redlining will finally be able to access credit services from Citadel in their own neighborhoods, including at the new branches required by the settlement.”
Citadel Credit Union President and CEO Bill Brown commented on the settlement by remarking: “As we look back at our history, this is a situation arising from what we weren’t doing, rather than one of intentional acts. Banking has not been immune to the digital disruption that has swept across various industries for decades and Citadel’s robust focus on our digital journey shifted our strategy away from new brick-and-mortar branches in recent years, which inadvertently impacted our ability to serve our region as broadly as we had planned. Philadelphia has always been, and remains, part of our growth plan, but the evolution of our business model led to us falling short of opening branches in Philadelphia as we had agreed to do when we expanded our charter.”
Brown added, “While Citadel respectfully disagrees with the allegations regarding our lending practices, we view this settlement as a vital opportunity to enhance our commitment to proactive community engagement. We acknowledge that our efforts did not allow us to reach majority Black and Hispanic census tracts in Philadelphia. This settlement marks a significant milestone in our ongoing journey towards creating a more inclusive and equitable future for all communities in our service area. Our decision to resolve this matter reflects our dedication to focusing on the future and continuing to make a positive impact in all communities we serve. We remain committed to fulfilling our promises to Build Strength Together.”
Photo courtesy Citadel Federal Credit Union
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Is this redlining or business practices? It has nothing to do with color but choosing where profitability comes in. The area was obviously served by lenders and no one was harmed. It was a crime looking for an offender to polish the DOJ
It’s a CREDIT UNION, not a for profit bank. 🙄 They failed to serve ~30% of the very community their charter is designated to serve.
Touché! The case closed is officially buried. Let’s hope they take it as a learning opportunity. 2024 and we are still dealing with this. Ugh!
Regulators often compare lending patterns across similar institutions to assess whether certain communities are being underserved. If Citadel’s rivals are generating applications at three times the rate in those neighborhoods, it suggests that those areas may have been overlooked or avoided by Citadel, whether intentionally or not. This is a failure to meet the credit needs of all communities. 75% Black and Hispanic. That would be head scratching if you did not have more loans. You were caught now pay the piper
Lending should be in accordance with credit, not color.
This is the result of a Marxist idea that has been embedded within our leagal system. This idea is if it can be shown that an identifiable group (in this case blacks and hispanics) is not being served on an equal percentage basis with other groups, it is by definition unlawful discrimination. Things like credit worthiness, business models, basic business opportunity to expand in one area or another, competition, etc. are not considered; only the percentages of identifiable groups. In other words, government enforced racism. If anything, it is stated that Citidel’s competators were writing 3 to 4 time as many loans in these areas, meaning Citidel is losing out on potential business, or their expansion opportunities simply didn’t arise in those areas, not because of racial discrimination.
It’s a Credit Union! Their charter specifies the communities they exist to serve. They got lucky with just a fine instead of losing their charter.
Chris- thanks for both your comments.
I don’t see this as racial discrimination. I’m in agreement with David Campbell. Citadel did not have offices in predominately black or hispanic locations. I assume with all business that location is based on a number of things, commercially – traffic would be #1. With all Real Estate – Location, location, location. I would not expect my credit union to have offices in every location of my state / county / parish. I would make the assumption that all ethnicities were able to walk into any Citadel location and do paperwork to request a loan. Regardless of race, if they could qualify for the loan, there is no issue. I do understand that if this stipulation is part of the agreed upon charter they need to be men or women of their word and follow the charter.
This looks like a BOGUS lawsuit similar to NAR lawsuit. Credit unions typically have stricter membership guidelines. CUs monies are members’ deposits, unlike banks getting money from private federal reserves. Therefore, you would expect CUs to exercise financial scrutiny when approving loans.
Secondly, who would have CUs in the hood? In California, most CUs are in the suburbs where it’s saf(er).
Like the NAR lawsuit, there are probably less than 10 people who got loans disapproved. Welcome to tyranny with dystopian sprinkles.