Trustmark Bank to pay $5 million ‘redlining’ fine

Trustmark National Bank will pay $5 million in fines to federal regulators to settle allegations it actively avoided offering and marketing home loans to Black and Hispanic customers, federal officials announced Friday.

The Justice Department, Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC) announced a joint consent order with Trustmark, accusing the bank of a pattern of “redlining” in the Memphis, Tenn., region. 

Redlining covers a broad range of techniques used by banks and lenders to avoid offering mortgage loans to non-white customers. While redlining historically involved explicit bans on loan offers to customers from majority Black or Hispanic neighborhoods, it can also include a failure to broadly market mortgage loans or make them easily available in those areas.

“Lending discrimination runs counter to fundamental promises of our economic system. 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 Garland in a statement.

“Today, we are committing ourselves to addressing modern-day redlining by making far more robust use of our fair lending authorities,” he continued. “We will spare no resource to ensure that federal fair lending laws are vigorously enforced and that financial institutions provide equal opportunity for every American to obtain credit.”

Federal officials alleged that between 2014 and 2018, Trustmark avoided locating branches in majority-Black and Hispanic communities, failed to assign a single loan office to majority-Black and Hispanic communities, failed to monitor its compliance with fair lending laws and discouraged home loan applications from Black and Hispanic borrowers.

While 50 percent of census tracts in the Memphis area are majority-Black and Hispanic, only four of Trustmark’s 25 branches were located in majority-Black and Hispanic communities, the complaint alleged. Trustmark also allegedly did not assign any mortgage loan officers to its four branches in majority-Black and Hispanic communities, ensure broad access to home loans in those areas, nor advertise mortgages in those areas.

Trustmark’s peer banks in the Memphis area allegedly received 2.5 times as many mortgage applications from majority-Black and Hispanic communities, which federal officials cited as proof of the company’s discouraging actions.

“Trustmark purposely excluded and discriminated against Black and Hispanic communities” said CFPB Director Rohit Chopra in a statement. “The federal government will be working to rid the market of racist business practices, including those by discriminatory algorithms.”

Under the consent order, Trustmark will pay $5 million to settle allegations it violated the Fair Housing Act and Equal Credit Opportunity Act, which ban racial discrimination in housing and credit transactions, respectively. The OCC also penalized Trustmark for allegedly violating the Community Reinvestment Act, which requires banks to meet the credit needs of underserved areas within its customer range.

Trustmark will also pay $3.85 million to subsidize home loans for residents of majority-Black and Brown communities.

“We fully cooperated with the agencies and have entered into these settlements to avoid the distraction of protracted litigation and because we share the common goals of breaking down barriers to home financing and exploring innovative ways to help residents of underserved areas achieve the dream of homeownership,” said Duane A. Dewey, Trustmark president and CEO, in a statement.

“We look forward to making continued progress on the lending initiatives and operational enhancements we began implementing six years ago.”

The consent order with Trustmark is the second major redlining penalty issued under the Biden administration. The parent company of Cadence Bank agreed in August to pay roughly $8.5 million in fines and community investments to settle charges of lending discrimination brought by the Justice Department and a federal bank regulator.