Provident Funding Associates Was Accused of Lending Discrimination Against African-Americans and Hispanic Borrowers

Settlement Provides $9 Million in Compensation to African-American and Hispanic Borrowers

The Justice Department and Consumer Financial Protection Bureau filed a consent order yesterday to resolve allegations that Provident Funding Associates engaged in a pattern or practice of lending discrimination that increased loan prices for African-American and Hispanic borrowers who obtained residential mortgages between 2006 and 2011 from Provident’s nationwide network of mortgage brokers.

The settlement, which is subject to court approval, was filed in conjunction with the complaints from the DOJ and CFPB in the U.S. District Court for the Northern District of California.  The complaint alleges that Provident violated the Fair Housing Act and Equal Credit Opportunity Act (ECOA) by charging thousands of African-American and Hispanic borrowers higher fees on mortgage loans not based on borrower risk, but because of their race or national origin.  Provident cooperated fully with the agencies’ investigation into its lending practices and agreed to settle this matter without contested litigation.

“The Civil Rights Division is committed to ensuring that all types of lending institutions, including wholesale mortgage lenders, comply with the fair lending laws,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division.  “We look forward to further collaboration with the Consumer Financial Protection Bureau in protecting consumers from illegal and discriminatory lending practices.”

“The settlement demonstrates this U.S. Attorney’s office will devote the resources necessary to root out and address unfair lending practices that affect citizens of this district,” said U.S. Attorney Melinda Haag of the Northern District of California.  “The law is clear: access to mortgage loans may not be made more difficult because of an applicant’s race or national origin.  We are glad that Provident has agreed to put an end to this practice without engaging in protracted litigation.”

“Consumers should never be charged higher fees because of their race or national origin,” said Consumer Financial Protection Bureau Director Richard Cordray.  “We will continue to root out illegal and discriminatory lending practices in the marketplace.  I look forward to working closely with our partners at the Department of Justice to ensure consumers are treated fairly.”

The lawsuit originated from a 2011 referral by the Federal Trade Commission (FTC) to the Justice Department’s Civil Rights Division.  In 2012, the Bureau joined the Justice Department’s investigation.

Under the terms of the proposed settlement, Provident will pay $9 million into a fund for the benefit of victims of its alleged mortgage lending discrimination.  The proposed settlement provides for an independent administrator to contact and disburse payments to borrowers whom the agencies identify as victims of Provident’s discrimination, at no cost to the borrowers.  Provident will pay all costs and expenses of the administrator.  Borrowers who are eligible for compensation will be contacted by the administrator.  The department will make a public announcement and post contact information on its website once the administrator begins contacting victims.

The Justice Department’s enforcement of fair lending laws is conducted by the Fair Lending Unit of the Housing and Civil Enforcement Section in the Civil Rights Division.  Since the Fair Lending Unit was established in February 2010, it has filed or resolved 39 lending matters under the Fair Housing Act, ECOA, and the Servicemembers Civil Relief Act.  The settlements in these matters provide over $1.2 billion in monetary relief for impacted communities and individual borrowers.  The Attorney General’s annual reports to Congress on ECOA enforcement highlight the department’s accomplishments in fair lending and are available at www.justice.gov/crt/publications/.