The U.S. Department of Justice and the Consumer Financial Protection Bureau (CFPB) have reached a settlement resolving allegations of discriminatory lending based on race on the part of California-based Provident Funding Associates, according to a joint announcement from the two government agencies.
The settlement, filed in conjunction with the agencies' complaint in the U.S. District Court for the Northern District of California, is subject to court approval. The complaint accuses Provident of violating the Fair Housing Act by charging thousands of African-American and Hispanic borrowers higher fees based on their race or national origin rather than on borrower risk.
"Consumers should never be charged higher fees because of their race or national origin," said Consumer Financial Protection Bureau Director Richard Cordray. "We will continue to root out illegal and discriminatory lending practices in the marketplace. I look forward to working closely with our partners at the Department of Justice to ensure consumers are treated fairly."
The suit resulted from a 2011 referral by the Federal Trade Commission to the Justice Department's Civil Rights Division. The CFPB joined the investigation in 2012. According to the announcement, Provident fully cooperated with the investigation and agreed to settle the allegations without contested litigation.
"The law is clear: access to mortgage loans may not be made more difficult because of an applicant’s race or national origin," said U.S. Attorney Melinda Haag of the Northern District of California. "We are glad that Provident has agreed to put an end to this practice without engaging in protracted litigation."
The proposed settlement calls for Provident to pay $9 million into a fund for the victims of the alleged discriminatory lending. Payments will be dispersed by an independent administrator to borrowers identified by the agencies as victims in the case under the terms of the settlement. Provident will pay all expenses related to the use of the independent administrator.