The U.S. Department of Justice (DOJ) has reached a $3 million settlement with ESSA Bank & Trust (ESSA) to resolve allegations that it engaged in the redlining of majority-Black and Hispanic neighborhoods in and around Philadelphia.
According to the DOJ, ESSA failed to provide mortgage lending services and did not serve the credit needs of majority-Black and Hispanic neighborhoods in the Philadelphia metropolitan area between 2017 and 2021. Under the proposed consent order, ESSA agreed to invest at least $2.92 million in a loan subsidy fund to increase access to credit for home mortgage, improvement and refinance loans, as well as home equity loans and lines of credit, in majority-Black and Hispanic neighborhoods in the bank’s lending area.
ESSA also agreed to allocate $125,000 for community partnerships and $250,000 on advertising, outreach, consumer financial education and credit counseling aimed at consumers in majority-Black and Hispanic communities. The consent order also requires the bank to hire two new mortgage loan officers to serve its existing branches in West Philadelphia and conduct a research-based market study to help identify the needs for financial services in communities of color.
The settlement does not include civil penalties levied against ESSA.
“For too long, residents of communities of color have been unlawfully denied equal access to credit and shut out of economic opportunities,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “When banks engage in redlining, they perpetuate existing patterns of segregation and widen the racial wealth gap in our country. This resolution makes clear our commitment to holding banks and financial institutions accountable for modern day redlining while ensuring access to fair lending in communities of color.”
Gary S. Olson, president and CEO of the Stroudsburg, Pennsylvania-based ESSA, did not acknowledge that his institution engaged in redlining.
“This settlement reflects our business decision to avoid the costs, uncertainties, and distractions of litigation,” said Olson, adding that “during the time period covered by the government’s complaint, ESSA did not receive a single fair lending complaint from any customer or potential customer … We are proud of our record of community service. While vehemently denying the government’s allegations of redlining, we have cooperated expeditiously and fully with the investigation into this matter.”
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The fact the ESSA Bank did not have one complaint supports the banks denial of these allegations.