In a case that demonstrates the scope of the Consumer Financial Protection Bureau’s (“CFPB’s”) reach, the CFPB and Department of Justice (“DOJ”) have entered into a settlement with BancorpSouth totaling almost $10,600,000 over alleged redlining. Redlining is the practice of denying services or raising prices to residents of certain geographic areas based upon their racial or ethnic makeup. The term was coined from the practice by lenders of marking in red areas on maps of cities that were not desirable for mortgage loans.
According to the CFPB and DOJ, when BancorpSouth expanded into the Memphis market, it did not build any branches in neighborhoods with large minority populations. Further, nearly all of its loans allegedly originated outside minority neighborhoods. The fine was announced as part of a settlement between BancorpSouth and the government under which, if approved by the court, Bancorp South will provide $4,000,000 in direct loan subsidies in minority neighborhoods, spend at least $800,000 on community programs and minority outreach, pay $2,780,000 to African American customers who were overcharged or denied credit, and pay a $3,000,000 penalty. Although it settled with the government, BancorpSouth did not admit guilt.
