The oldest community bank in the U.S. agreed last week to pay $9 million to settle claims that it discriminated against Black and Hispanic Rhode Island residents who sought mortgages.
For at least six years dating back to 2016, during its expansion throughout Rhode Island, Washington Trust Co. allegedly redlined, turning away lenders from majority-Black and Hispanic neighborhoods, according to a press release from the Department of Justice.
Washington Trust also never opened a branch in those neighborhoods and only used loan officers who worked out of majority-white neighborhoods to generate loan applications, the department alleged. The bank also did not train its staff or do any outreach in Black- or Hispanic-majority neighborhoods or to advertise to these communities to make up for the lack of branches in those areas.
Other banks received nearly four times as many loan applications from majority-Black and Hispanic Rhode Island neighborhoods as Washington Trust each year from 2016 to 2021. The applications that did come in from Black- and Hispanic-majority neighborhoods were disproportionately from white residents, the DOJ alleges.
A judge still has to approve the proposed agreement. If approved, Washington Trust agreed to:
- Invest at least $7 million in a loan subsidy fund to increase access to home mortgage, home improvement, home refinance and home equity loans and lines of credit for residents of majority-Black and Hispanic neighborhoods in Rhode Island;
- Spend $1 million on community partnerships to provide services that increase residential mortgage credit access for residents of those neighborhoods;
- Spend $1 million on advertising, outreach, consumer financial education and credit counseling focused on majority-Black and Hispanic neighborhoods;
- Open two new branches in majority-Black and Hispanic neighborhoods in Rhode Island and ensure at least two mortgage loan officers are dedicated to serving those neighborhoods;
- Employ a director of community lending who will oversee the lending in communities of color
Washington Trust also agreed to complete a community credit needs assessment, to assess and report on its fair lending program; and to train staff on the bank’s obligations under the consent order. Washington Trust worked cooperatively with the department to resolve and remedy the redlining concerns that were identified and agreed to settle this matter without contested litigation.
“Everyone who pursues the American dream has the right to expect to be treated equally and with dignity, regardless of their race, their background, or zip code. When communities are denied access to fair lending, families are denied the opportunity to build stability and financial success,” said Zachary Cunha, U.S. attorney on the case.
The Justice Department has focused on redlining in recent years.
In January, City National Bank agreed to pay $31 million, a record for redlining settlements, related to claims that the bank systematically discriminated against Black and Hispanic Los Angeles residents who wanted mortgages.