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City National Bank to Pay $31 Million in Lending Discrimination Settlement

The Ascent 1/26/2023 Emma Newbery
A couple unpacks cardboard boxes and organizes jars on shelves in their new kitchen. © Getty Images A couple unpacks cardboard boxes and organizes jars on shelves in their new kitchen.

City National Bank has agreed to pay over $31 million in loan subsidies and outreach activities as part of a settlement with the Justice Department on redlining. The bank says it does not agree with the allegations, but supports the DOJ in its efforts to ensure all customers can access fair lending. Find out what redlining is and what you can do if you've been unfairly denied credit.

What is redlining?

The word redlining is used to talk about various forms of discriminatory home loan practices. It applies to situations where people are denied mortgages, loans, or insurance based on where they live, rather than their own credit worthiness. It originated because of the way authorities drew red lines on maps to indicate mixed race or predominantly Black and Hispanic neighborhoods that were deemed more risky in terms of lending.

As a result, those areas were starved of investment for decades. According to the New York Times, it shaped "racial disparities in America in access to housing, credit and wealth accumulation." Not only did the lack of affordable loans and mortgages affect property prices, it impacted people's lives in a host of other ways. At the heart, it stopped people in redlined areas from investing in their homes and building wealth. It also led to an increase in predatory lending practices as residents couldn't access other lending products.

City National Bank's $31 million settlement

The Justice Department's settlement with City National Bank is part of a wider initiative to address redlining. The Justice Department is working with the Consumer Financial Protection Bureau (CFPB) and the Office of the Comptroller of the Currency to combat redlining nationwide.

"When people are denied credit simply because of their race or national origin, their ability to share in our nation's prosperity is all but eliminated," said Attorney General Merrick B. Garland. In a press release, Garland said the settlement with City National Bank is the "largest redlining settlement in Department history."

As part of the over $31 million agreement, City National Bank will:

  • Invest $29.5 million on loan subsidies in Black or Hispanic neighborhoods in Los Angeles County.
  • Spend $1.75 million on advertising, outreach, education, and partnerships in affected neighborhoods.
  • Open one new branch and employ more loan officers in majority-Black and Hispanic neighborhoods.

The City National Bank has not admitted any wrongdoing. In a statement, the bank said, "We disagree with the allegations, but nonetheless support the DOJ in its efforts to ensure equal access to credit for all consumers, regardless of race."

What to do if you're the victim of lending discrimination

It is illegal to refuse someone credit or offer them less favorable terms because of race, color, sex, age, or other factors. Unfortunately, as the story above shows, it still happens and it isn't always easy to spot. If you are concerned about lending discrimination, here are steps you can take.

1. Know your rights

It's important to understand what is and isn't allowed when you're applying for a loan. The Equal Credit Opportunity Act contains a lot of provisions designed to prevent discrimination. For example, a lender is allowed to ask you about your race or sex, but you have the right not to answer. Lenders are also required to give you specific reasons as to why an application was rejected or tell you that you're entitled to know the reason if you ask within 60 days.

Before you apply for a loan, check your credit report. Your credit report is used to calculate your credit score, and through 2023 you can get free weekly credit reports online at Look to see if there are any errors, as these may impact your ability to qualify for a loan.

2. Shop at multiple lenders

Whether you're in the market for a personal loan or mortgage, getting quotes from several lenders can help you get the best terms for your financial situation. Rate shopping may also raise red flags in terms of discriminatory lending practices. One lender may offer you a significantly higher interest rate or more unfavorable terms than others. It may deny the loan. This could be an indication there's something else going on.

If you're worried about the impact of rate shopping on your credit score, it will take a ding when lenders carry out a hard credit check, which they do when you apply for a loan. However, the credit bureaus treat all applications made within a short timeframe as just one inquiry. That means rate shopping won't hurt your score any more than a single application would, as long as you make all the applications around the same time.

3. Report discriminatory practices

If you encounter discrimination when applying for a mortgage or loan, it's worth speaking up. There are a few ways you can report the situation, including speaking directly to the lender, and contacting your state attorney general's office. You can also report discriminatory practices directly to the Department of Justice online, contact the CFPB, or the Department of Housing and Urban Development.

Bottom line

The practice of redlining had a huge impact on racial segregation in the United States, as well as people's ability to own and invest in their homes. There are now laws in place to prevent lending discrimination, but unfortunately it still happens and the impact of historical actions are still felt today.

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