The Department of Justice (DOJ) announced that it has entered into a settlement with American Bank of Oklahoma (ABOK) to resolve allegations that ABOK engaged in unlawful redlining in Tulsa, Oklahoma.  The DOJ opened its investigation of ABOK after receiving a referral from the FDIC.

In its complaint, the DOJ alleged that from 2017 through at least 2021:

• All of ABOK’s branches and loan production offices were located in majority-white neighborhoods;
• For purposes of the CRA, ABOK designated its Tulsa Metropolitan Services Area (MSA) to exclude all of the majority-Black and Hispanic-census tracts in the MSA;
• ABOK did not assign a single loan officer to conduct outreach in majority-Black and Hispanic areas and did not market, advertise, or take steps to generate loans from majority-Black and Hispanic neighborhoods;
• ABOK failed to implement effective fair lending compliance management systems;
• ABOK significantly underperformed its “peer lenders” in generating home loan applications from majority-Black and Hispanic neighborhoods;
• ABOK made a smaller percentage of HMDA-reportable residential mortgage loans in majority-Black and Hispanic neighborhoods compared to its peers; and
• ABOK loan officers and executives sent and received emails via their ABOK email accounts containing racial slurs and racist content.

Notably, in addition to alleging that ABOK’s redlining practices violated the Fair Housing Act, the DOJ alleged that such practices violated the Equal Credit Opportunity Act.  The question whether the ECOA applies to prospective applicants is currently before the U.S. Court of Appeals for the Seventh Circuit in Townstone Mortgage.  The CFPB appealed to the Seventh Circuit from the district court’s decision in the CFPB’s enforcement action against Townstone in which the district court ruled that a redlining claim may not be brought under the ECOA because the statute only applies to applicants and not to prospective applicants.

The actions that ABOK must take under the proposed consent order include:

• Hire or designate a full-time director of community lending to oversee the development of ABOK’s mortgage lending in majority-Black and Hispanic census tracts and ABOK’s compliance with the consent order;
• Establish a community-oriented loan production office in a majority-Black and Hispanic census tract in Osage, Rogers, Tulsa or Wagoner counties within the Tulsa MSA (Tulsa Lending Area) that has a no-fee ATM for ABOK customers and with lower fees for non-customers than what is available at nearby ATMs for non-customers;
• Assign at least two full-time loan officers to solicit mortgage applications primarily in majority-Black and Hispanic census tracts in the Tulsa Lending Area;
• Invest at least $950,000 in a loan subsidy fund with the goal of increasing credit for home mortgage loans, home improvement loans, and home refinance loans made in majority-Black and Hispanic neighborhoods in the Tulsa Lending Area (with no more than 25% of the fund to be used for refinances);
• Partner with one or more community organizations that provide residents of  majority-Black and Hispanic census tracts in the Tulsa Lending Area with services related to credit, financial education, home ownership, and foreclosure prevention and, through these partnerships, spend at least $20,000 per year ($100,000 over the term of the consent order) on professional services to majority-Black and Hispanic census tracts in the Tulsa Lending Area that increase access to residential mortgage credit;
• Spend at least $20,000 per year ($100,000 over the term of the consent order) on advertising and outreach directed to residents and prospective residents of  majority-Black and Hispanic census tracts in the Tulsa Lending Area;
• Advertise its mortgage lending services and products to majority-Black and Hispanic census tracts in the Tulsa Lending Area at least to the same extent that it advertises its mortgage lending services and products to majority-white census tracts in the Tulsa Lending Area; and
• Provide at least six financial education events per year, with translation and interpretation services in Spanish, targeted towards residents of  majority-Black and Hispanic census tracts in the Tulsa Lending Area.

In its press release about the settlement, the DOJ indicated that it is part of the DOJ’s initiative to combat redlining, which it announced in October 2021.  Other redlining cases that have been part of this initiative include settlements with ESSA Bank & Trust and Park National Bank.

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