Bancorp South will pay over $10 million in fines for blocking home financing and charging inequitable interest rates to minorities in the greater Memphis area, pending court approval of a settlement with the U.S. Department of Justice. The federal complaint alleges that Bancorp “redlined” Memphis area consumers from 2011 to 2013, broadly denying loans to black and other minority neighborhoods, drying up potential investment in impoverished communities.
Probes by the DOJ found that Bancorp routinely denied loans to black applicants more often than its branches denied white applicants with similar credit profiles. The DOJ reports that the Mississippi-based corporation will pay $7 million in loan relief for the communities impacted, put another $800,000 in a community outreach campaign and pay $3 million in civil penalties. Bancorp will also revise and repair its policies to root out race-based lending.
“When banks discriminate on the basis of race, they violate our civil rights laws and threaten the foundation of a fair economy,” Principal Deputy Assistant Attorney General Vanita Gupta said in a press release. “The Civil Rights Division will continue to enforce our nation’s fair lending laws to ensure that qualified applicants and borrowers can access credit and invest in their financial future without facing unlawful barriers.”
Outlawed in the 1960s, “redlining” was widespread in American cities following the creation of the Federal Housing Administration in 1934. The FHA color coded city grids according to desirability for investment and lending, with troubled neighborhoods often colored red. Patterns of disinvestment in black, inner-city communities emerged throughout the middle 20th century, resulting in patchwork cities rife with urban decay.
The Atlantic’s Ta-Nehisi Coates scathed profligate redlining in making his stunning if controversial case for black reparations in a 2014 issue of The Atlantic. You can read more about the practice here.
Bancorp South operates three branches in the Acadiana area in Lafayette, Broussard and New Iberia.