NY Attorney General Settles Agreement with Bank in Fight to End Discrimination

by February 2, 2015

Prompted by concerns of New York banks not lending to minority groups after the mortgage and financial crisis in 2008, Attorney General Eric Schneiderman’s Civil Rights Bureau launched an investigation into the claims.

The investigation found that Five Star Bank’s lending area included most of the surrounding area around the city of Rochester, N.Y., but not the city itself or any area that consisted of predominantly minority residents. This went on from at least 2009 to 2013. During this time, the bank also enacted a policy that pronounced any property outside of their lending areas as an “undesirable loan type,” which discouraged borrowers from mostly minority areas.

It was also found that the bank rejected borrowers who were looking for a mortgage of $75,000 or less for seven out of 12 of the mortgage products they offered. Since the mortgage in the predominantly minority neighborhoods averaged less than Five Star’s cap, the policy was discouraging for residents who hailed from those communities.

This agreement between the attorney general and Five Star requires the bank to open two new branches in areas with at least a 30 percent minority population. One of the offices will be within at least two miles of a majority minority neighborhood, the second will be within one mile. Additionally, $250,000 will be devoted to advertising directed to minority communities, and $500,000 in discounts and subsidies on loans for minority neighborhood residents in the Rochester metro area is also included in the agreement.

The bank also has agreed to maintain its extended lending area, eliminate its minimum mortgage amount requirement, pay $15,000 in costs to the state of New York, provide live-fair training to its employees and submit to monitoring for the next three years.

The attorney general stated, “All New Yorkers, regardless of the color of their skin or the racial composition of their neighborhood, must be afforded an equal opportunity to obtain credit.” Hopefully this agreement will help actualize this sentiment.

District 9 Councilwomen Inez Dickens commented that she was “glad the attorney general was able to seek social and economic justice for the people of Rochester.”

Schneiderman continued, “My office will continue to fight for equal justice under law for all New Yorkers and to ensure that lenders treat people fairly in the marketplace. It’s truly disheartening that in 2015, we are still confronting the systematic racial discrimination that has persisted throughout our nation’s history.”

“Home ownership is the major dream of most Rochesterians. It usually is the single largest investment made by a family,” said William G. Clark, president and CEO of the Urban League of Rochester. “To deny this dream through unfair lending practices not only prevents these families from building wealth through home equity, it also leads to a decline of housing values in the impacted neighborhoods. We applaud the attorney general’s efforts and commitment to ensuring that all families are afforded a fair and equal opportunity for home ownership in the communities of their choice.” •

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