Another big lender settles case for discrimination against blacks and

[H10]

This is about the 12th or so lender in the last 7 years who has settled a case for discrimination against lending for blacks and hispanics. Its sad that this type of discrimination continues today which is probably why affirmative action needs to continue in the united states.

The Justice Department unveiled a settlement Thursday afternoon with a finance group for discriminating against minority home borrowers across five years.

San Bruno, Calif.-based Provident Funding Associates is accused of charging 14,000 minority borrowers interest rates and broker fees that were on average hundreds of dollars, and at times thousands, higher than what white borrowers paid. The practice started as early as 2006 and lasted through at least 2011, according to the Justice Department’s complaint.

The discrimination occurred, the Justice Department found, because of Provident’s practice of giving its mortgage brokers “subjective and unguided discretion” in how they determined their rates and fees.

From 2006 to 2011, the complaint says, Provident charged African-American borrowers total broker fees that were 38.6 basis points higher on average as a percentage of the loan amount than the total broker fees charged to white borrowers.

This disparity climbed as high as 58.2 basis points in 2008

This isn’t the only financial firm exposed as having discriminated against minority borrowers this week: TheWashington Post reported today that Wisconsin’s largest bank settled charges it had in the Midwest from 2008 to 2010.

If you were black or Hispanic and wanted a home loan, a number of banks put you on a separate, more expensive track regardless of your credit score and gainful employment.

These rates, the Justice Department alleges, were based on the color of your skin -- practices that helped mushroom the extent of the U.S. housing crisis.

The pattern is becoming increasingly clear from a series of court settlements negotiated with lenders by the department and the Consumer Financial Protection Bureau over the last three years with the likes of Bank of America, Wells Fargo, Suntrust and now PNC Financial Services Group.

The latest settlement, requiring PNC to pay $35 million, was announced on Monday, Dec. 23rd and covers the behavior of the National City Bank. The Cleveland-based bank was later purchased by Pittsburgh-based PNC.

In late 2011, the department sued Countrywide Financial Corp., for the first time alleging that a major lender had steered minorities into so-called sub-prime mortgages with higher interest rates, based solely on their race. Bank of America, which had acquired Countrywide, paid a record $335 million to settle allegations that 200,000 minorities had been charged higher interest rates than white borrowers between 2004 and 2008.

Then in May 2012, after a 2 1/2-year inquiry that included a review of 850,000 residential mortgage loans, the department reached a $21 million settlement with SunTrust Mortgage, a subsidiary of Atlanta-based SunTrust Bank, stemming from allegations that of racial bias against minorities between 2005 and 2009.

In July 2012, the nation's largest home loan originator -- Wells Fargo -- paid $175 million to settle charges that it steered about 4,000 minorities in the Mid-Atlantic region into more expensive sub-prime loans even though they qualified for better terms. Rates for sub-prime loans, by definition, rose sharply after an initial period. The Wells Fargo settlement stated that the bank asserted it had "treated all of its customers fairly and without regard to impermissible factors such as race and national origin."

A federal civil rights suit filed along with Monday's proposed settlement in U.S. District Court for the Western District of Pennsylvania alleges that National City Bank, its 400 retail offices and its national network of mortgage brokers stuck more than 75,000 African-American and Hispanic borrowers across the country with higher loan rates and fees between 2002 and 2008.

"This settlement will provide deserved relief to thousands of African-American and Hispanic borrowers who suffered discrimination at the hands of National City Bank," Attorney General Eric Holder said.

Steve Dettelbach, the U.S. attorney for the Northern District of Ohio, said that "it undermines confidence in our banking system when people get different deals not only based on their credit scores, but their skin color. With all the positive things for which National City Bank stood for so many years, this is a troubling epilogue to be entered on the other side of the ledger. Hopefully, today's settlement will afford some relief to customers who were shortchanging by this conduct."

Read more here: http://www.mcclatchydc.com/2013/12/23/212504/another-big-bank-pays-to-settle.html#storylink=cpy

http://www.mcclatchydc.com/2013/12/23/212504/another-big-bank-pays-to-settle.html

[TimG]

This is about the 12th or so lender in the last 7 years who has settled a case for discrimination against lending for blacks and hispanics. Its sad that this type of discrimination continues today which is probably why affirmative action needs to continue in the united states.

I suspect the practice of steering unsophisticated clients to subprime loans included many whites but such stats would not help lawyers looking for excuses to claim discrimination. IOW, this is more likely a case of greedy banks taking advantage of less financially aware clients than it is of discrimination. The fact that banks settled is more a reflection of the PR consequences of a public jury trial than it is of any belief that there was actual discrimination based on race. Edited May 30, 2015 by TimG

[dre]

The fact that banks settled is more a reflection of the PR consequences of a public jury trial than it is of any belief that there was actual discrimination based on race.

Wow what a completely unsubstantiated assumption.

[TimG]

Wow what a completely unsubstantiated assumption.

No less substantiated then the claim that since minority clients were directed to subprime loans then the reason must be racial discrimination. More importantly, the problems with the US justice system are well known and many innocent people feel they need to plead guilty because they don't want to risk much worse at a trial. Edited May 30, 2015 by TimG

[Je suis Omar]

I suspect the practice of steering unsophisticated clients to subprime loans included many whites but such stats would not help lawyers looking for excuses to claim discrimination. IOW, this is more likely a case of greedy banks taking advantage of less financially aware clients than it is of discrimination. The fact that banks settled is more a reflection of the PR consequences of a public jury trial than it is of any belief that there was actual discrimination based on race.

How many contentions did you raise, TimG? How many of those contentions are completely unsupported?

[H10]

No less substantiated then the claim that since minority clients were directed to subprime loans then the reason must be racial discrimination. More importantly, the problems with the US justice system are well known and many innocent people feel they need to plead guilty because they don't want to risk much worse at a trial.

Typically when you have alot of money you don't have to plead guilty, unless you are guilty. This isn't the first bank the 12th major one in 7 years. The other things is corporations are known for notoriously fighting tooth and nail against any discrimination case. They only plead guilty because the evidence is so overwhelming.

Further you offer no explanation on how

"If you were black or Hispanic and wanted a home loan, a number of banks put you on a separate, more expensive track regardless of your credit score and gainful employment."

How do you explain this, it doesn't need an answer they plead guilty. But it does give insight into your mind. It is very hard to get convicted on a discrimination claim because typically the company can lie and say it was for some other reason, but when you have it occuring and no other reason can be identified... same credit scores, same income, same job, there is no way to explain it. In some cases you have a black and white who work side by side, same job, same pay, same credit scores and assets different rates.

[TimG]

Typically when you have alot of money you don't have to plead guilty, unless you are guilty.

Nonsense. A plea deal will be much cheaper no matter how much money one has. Plus a plea deal minimizes the bad PR which is often extremely damaging even if one is vindicated in court. I am sure you are aware of the many innocent people in US prisons because they decided that a few years on a plea deal was preferable to life in prison. The same pressures affect companies.

If you were black or Hispanic and wanted a home loan, a number of banks put you on a separate, more expensive track regardless of your credit score and gainful employment.

There is no evidence that the *reason* for the treatment was because people were black or hispanic because to have such evidence you would need to read the minds of bank officials which is impossible. In fact, I find the suggestion completely implausible. The more likely explanation is the banks directed many clients (including white people) to subprime loans even if their credit scores did not require it because they could make more money. Unlike the racism narrative this explanation actually makes sense but that would not allow the government to charge the banks with breaking a law.

The trouble with racism accusations is they presume that someone is able to know *why* someone else does something and in many cases there is no actual evidence for the *why*. It is just an assumption. Statistics are often no help because it is often easy to mine data to draw whatever conclusions you want. For example, the article did not mention how many white people with good credit were diverted to subprime loans even though there had to be some. The proportion of white people diverted to subprime loans could change the narrative from one of discrimination to to one of preferential treatment for minorities depending on the exact numbers. I could imagine a scenario where the bank would find admitting to racism cheaper than defending themselves by saying they screwed over as many people as they could and thereby expose themselves to much larger number of lawsuits from everyone who got a subprime loan.

Edited May 30, 2015 by TimG

[bush_cheney2004]

Post mortgage crisis studies demonstrate that the majority of mortgage foreclosures were for "Non Hispanic Whites" (56%).

[Je suis Omar]

Post mortgage crisis studies demonstrate that the majority of mortgage foreclosures were for "Non Hispanic Whites" (56%).

You might want to purchase a Turabian.

[H10]

Nonsense. A plea deal will be much cheaper no matter how much money one has. Plus a plea deal minimizes the bad PR which is often extremely damaging even if one is vindicated in court. I am sure you are aware of the many innocent people in US prisons because they decided that a few years on a plea deal was preferable to life in prison. The same pressures affect companies.

There is no evidence that the *reason* for the treatment was because people were black or hispanic because to have such evidence you would need to read the minds of bank officials which is impossible. In fact, I find the suggestion completely implausible. The more likely explanation is the banks directed many clients (including white people) to subprime loans even if their credit scores did not require it because they could make more money. Unlike the racism narrative this explanation actually makes sense but that would not allow the government to charge the banks with breaking a law.

The trouble with racism accusations is they presume that someone is able to know *why* someone else does something and in many cases there is no actual evidence for the *why*. It is just an assumption. Statistics are often no help because it is often easy to mine data to draw whatever conclusions you want. For example, the article did not mention how many white people with good credit were diverted to subprime loans even though there had to be some. The proportion of white people diverted to subprime loans could change the narrative from one of discrimination to to one of preferential treatment for minorities depending on the exact numbers. I could imagine a scenario where the bank would find admitting to racism cheaper than defending themselves by saying they screwed over as many people as they could and thereby expose themselves to much larger number of lawsuits from everyone who got a subprime loan.

Pleading guilty cannot minimize bad PR. You are admitting to discriminating against someone. You can't get worse PR than that. Was the company facing life in prison? A plea deal is only cheaper if you are found guilty. Because if you are not guilty you can recover your legal cost civilly.

Your belief that the only way to prove discrimination is based on reading people's mind's is senseless. We judge people on their discriminatory acts not their minds. It doesn't make sense why you are giving people with the same income and credit scores different deals based on race. Your comment is illogical.

You judge based on the act. If you have people with similar situations but only difference is race we can infer its racial discrimination if there is a pattern of discrimination in exact same situations. So if every time a black goes in he gets a hire rate than the white who goes in with the same income and credit score, we can determine it is indeed discrimination. Even if preferential treatment was given in lending to minorities it is still discrimination (this didn't occur here) you cannot give special rates based on races. There is no way they can be sued for giving everyone subprime loans, they are not illegal.

I'm not interested in debating that water is wet with you.

[H10]

Post mortgage crisis studies demonstrate that the majority of mortgage foreclosures were for "Non Hispanic Whites" (56%).

Given that non-hispanic whites are 62% of the population and have higher homeowner rates than non-whites, its actually a pretty good number. whites are probably 70%+ of homeowners, it means more non-whites were losing their homes. It means between blacks, hispanics and asians who combine to maybe 30% of the population they were losing 44% of their homes.

[TimG]

Pleading guilty cannot minimize bad PR. You are admitting to discriminating against someone.

Which is better than defending yourself by arguing that you systematically screwed over a large number of customers to make more money. Claiming that some of your loan officers are bigots is definitely a less damaging admission. You also forget the cost of litigation can often exceed the payment. There are legal firms in the US that launch frivolous suits knowing they won't stand up in court but also knowing that it is cheaper for large corporations to settle than to fight in court. A plea deal tells us nothing about the guilt of the party accepting the deal.

Your belief that the only way to prove discrimination is based on reading people's mind's is senseless. We judge people on their discriminatory acts not their minds.

An act is only discriminatory if it was motivated by racism. If loan officers simply identified financially unsophisticated clients that would not know better and directed all of those clients, regardless of race, to subprime loans then no discrimination took place even if the stats show that that a disproportionate number of blacks and hispanics where affected.

In most cases only way to really establish racism is it read the mind of the accused. Statistical analyses cannot prove discrimination because statistical analyses cannot show the reason behind the data. The reason is always assumed and in this case there is are other more plausible explanations for the same data (i.e. banks were screening for clients that would not know better because they could make more money).

I'm not interested in debating that water is wet with you.

You are not debating facts. You are assuming that your assumptions are facts. I am pointing out that your assumptions are NOT facts but simply assumptions and it is not reasonable to expect other people to accept your assumptions as facts. Edited May 30, 2015 by TimG

[kimmy]

I suspect the practice of steering unsophisticated clients to subprime loans included many whites but such stats would not help lawyers looking for excuses to claim discrimination. IOW, this is more likely a case of greedy banks taking advantage of less financially aware clients than it is of discrimination.

Yes. They didn't set out to target minorities specifically. They set out to issue as many subprime mortgages as possible. That minorities were slightly over-represented in subprime mortgages is a reflection of larger demographic circumstances (ie, that minorities are over-represented in the economic bracket most likely to use subprime mortgages.)

The philosophy was the complete opposite of discrimination. Subprime mortgages for "anyone who can fog a mirror". Black? White? Brown? Broke? Unemployed? No education? It doesn't matter! Mortages for everyone.

The fact that banks settled is more a reflection of the PR consequences of a public jury trial than it is of any belief that there was actual discrimination based on race.

I doubt they even care about PR. I think their primary concern is with limiting future liabilities and obtaining cost certainty.

-k

[dre]

More importantly, the problems with the US justice system are well known and many innocent people feel they need to plead guilty because they don't want to risk much worse at a trial.

Hahahahhaha. Dude... the US justice system has an almost perfect history of giving financial criminals a complete pass. The government just wants their cut.

[TimG]

the US justice system has an almost perfect history of giving financial criminals a complete pass. The government just wants their cut.

Really, tell that to Conrad Black or Martha Stewart. The US does a much better job than other democracies when it comes to charging people with financial crimes. The problem in all countries it is it really hard to prove beyond reasonable doubt that someone did anything other than make a bad investment decision. Being an idiot is not not a crime. Edited May 30, 2015 by TimG

[dre]

Really, tell that to Conrad Black or Martha Stewart. The US does a much better job than other democracies when it comes to charging people with financial crimes. The problem in all countries it is it really hard to prove beyond reasonable doubt that someone did anything other than make a bad investment decision. Being an idiot is not not a crime.

Yes, or Bernie Made-Off or Jeffrey Skilling. Small potatoes. The tiny handful of people that have been thrown to the wolves out of the thousands of investigations that have resulted in nothing but fines.

The reality is the DOJ is incredibly lenient with high level financial criminals. Especially senior bankers.

“THE message to every Wall Street banker is loud and clear,” cried Elizabeth Warren, a senator from Massachusetts, last year. “If you break the law, you are not going to jail.” After the savings-and-loan crisis of the early 1990s, Ms Warren pointed out, over 1,000 people were prosecuted, and more than 800 convicted. Yet since the financial crisis of 2007-08, which did far more damage to the economy, no senior banker has been convicted of any crime related to it. America’s regulators and prosecutors, Ms Warren complained, were not only failing to pursue those responsible; they were also declining to take the banks themselves to court. Instead, they were negotiating murky settlements, in which financial firms agree to pay big fines if prosecutors promise not to press charges.

Events this week have only made the senator more apoplectic. Regulators and prosecutors announced settlements with six international banks for alleged manipulation of currency markets (see article). The six agreed to pay some $5 billion in fines. Two did not admit to any crimes related to this abuse; the other four did, but received waivers shielding them from the consequence that would normally follow—the loss of an all-important banking licence. This week also marked the end of a 90-day period the Department of Justice (DoJ) had given itself to decide once and for all whether it could launch any prosecutions related to the financial crisis. The DoJ says only that it is reviewing the results of the review.

Immunity from prosecution! Ooooh what a harsh punishment!

Edited May 30, 2015 by dre

[TimG]

The tiny handful of people that have been thrown to the wolves out of the thousands of investigations that have resulted in nothing but fines.

A handful more than have been convicted in Canada. It is really hard to prove beyond reasonable doubt for any crime and prosecutors rely on plea deals and the threat created by mandatory minimums. Edited May 30, 2015 by TimG

[bush_cheney2004]

Hahahahhaha. Dude... the US justice system has an almost perfect history of giving financial criminals a complete pass. The government just wants their cut.

Nonsense of course...with no cites to back it up. U.S. federal and state low security prisons are fill with evidence otherwise.

[Bob Macadoo]

More importantly, the problems with the US justice system are well known and many innocent people feel they need to plead guilty because they don't want to risk much worse at a trial.

Oh you mean like Omar Khadr?

Edited May 30, 2015 by Bob Macadoo

[cybercoma]

Really, tell that to Conrad Black or Martha Stewart.

Really? You have an entire history of financial crimes going back to the Savings and Loan scandal and continuing right on through to today and you pick out Conrad Black and Martha Stewart as examples of the justice system addressing a generation old problem. That is f'ing hilarious.

[kimmy]

Oh you mean like Omar Khadr?

I think the prosecution of Aaron Swartz is a better example. They filed 10 years worth of charges against him and said they'd go easy if he plead guilty. When he refused, they went back to the books and concocted another 25 years worth of charges and said "how about now? Feel like pleading guilty yet?" When he still refused they went back to the books and came up with even more charges. He was facing over 50 years of potential jail time, when he killed himself.

The whole strategy was simply to increase the potential jail time until the risk of going to trial became so high that he would have to accept a plea bargain. If you have the choice between accepting a plea deal that gets you maybe 6 months to a year in jail, or rolling the dice on a trial that could get you locked up for 50 years, then you might choose to plead guilty even if you did believe you were innocent.

-k

[TimG]

The whole strategy was simply to increase the potential jail time until the risk of going to trial became so high that he would have to accept a plea bargain.

It is scary how much of the justice system depends on prosecutors getting guilty pleas (over 90% of cases plead out). On top of that you have assert forfeiture laws that allow the government to seize your asserts *before* conviction and thereby make it impossible to hire a lawyer. Edited May 31, 2015 by TimG

[kimmy]

It is scary how much of the justice system depends on prosecutors getting guilty pleas (over 90% of cases plead out). On top of that you have assert forfeiture laws that allow the government to seize your asserts *before* conviction and thereby make it impossible to hire a lawyer.

I'm not against the idea of plea bargains in principle. Generally charges are laid when prosecutors have a very strong case, and both prosecution and defense understand that a trial is likely to result in a conviction. In a case like that, why not make an agreement to save everybody the time and money. But the idea that prosecutor can just arbitrarily pile on more and more charges to increase potential jail time to almost any degree they wish is absurd. This is particularly the case in computer-related crime where the overlap between outdated computer laws, old-fashioned property crime, and other mail and telecommunications laws can give a creative prosecutor almost limitless possibilities.

As to forfeiture ... it's becoming quite farcical. In some places, sheriff's departments operate almost like privateers. I think there are legitimate applications for forfeiture laws, but it seems like they're being abused in a way they were never intended.

-k

[TimG]

But the idea that prosecutor can just arbitrarily pile on more and more charges to increase potential jail time to almost any degree they wish is absurd.

As with the forfeiture laws the problem is with the practice - not the theory. The issue is how much confidence can we have that innocent people are not being bullied into confessions and how many are actually guilty. I imagine most are guilty but if even 5% of innocent then that is a lot of innocent people going to jail.