LOS ANGELES — City National Bank in Los Angeles has agreed to pay $31 million to settle allegations of lending discrimination by the Justice Department in the largest redlining settlement in the agency's history.
The Justice Department said in a complaint filed Thursday that City National avoided offering home loans in Black and Hispanic neighborhoods in Los Angeles County from 2017 to 2020. Long known as "the bank to the stars" because of its ties to Hollywood and wealthy clients, City National
The complaint alleges that City National discouraged residents of majority-Black and Hispanic neighborhoods from applying for home loans. The Justice Department said that other banks in Los Angeles received six times the number of mortgage applications every year compared to City National. Further, City National opened just one branch in the past 20 years in a majority-Black and Hispanic neighborhood and did not assign a mortgage loan officer to that branch. By comparison, the bank opened or acquired 11 branches during that period.
The settlement is part of a major effort by Attorney General Merrick B. Garland to combat redlining through a partnership launched in 2021 between its civil rights division and U.S. attorneys' offices.
"This settlement should send a strong message to the financial industry that we expect lenders to serve all members of the community and that they will be held accountable when they fail to do so," Garland said in a
City National said in a statement that it disagreed with the allegations but still intended to go "above and beyond" the consent order by launching lending programs to support small businesses and homebuyers in underserved communities nationwide.
"We disagree with the allegations, but nonetheless support the DOJ in its efforts to ensure equal access to credit for all consumers, regardless of race," the bank said. "We are committed to ensuring that all consumers have an equal opportunity to apply for and obtain credit."
City National said it plans to "reinforce our commitment to our communities, and we will become an even better institution."
Under the settlement filed in the U.S. District Court for the Central District of California, City National has agreed to invest at least $29.5 million in a loan subsidy fund for residents of majority-Black and Hispanic neighborhoods in Los Angeles County. The bank said the subsidies will be used to provide interest rate reductions and down payment assistance.
The bank also agreed to spend at least $500,000 to advertise its new lending programs, set aside at least $500,000 for consumer financial education and invest at least $750,000 in community partnerships that provide home loan credit services.
City National also has agreed to open one branch in a majority-Black and Hispanic neighborhood and evaluate future opportunities for expansion within Los Angeles County. It will ensure that at least four mortgage loan officers are dedicated to serving majority-Black and Hispanic neighborhoods and will employ a full-time community lending manager as part of the consent order.
The bank also agreed to conduct a so-called community credit needs assessment, to identify the needs for financial services for majority-Black and Hispanic census tracts within the county.
In the coming months, City National said it will go further by launching special-purpose credit programs for commercial loans and residential mortgage loans that will target underserved populations in Los Angeles as well as New York, Georgia, Nevada and Tennessee. The bank also plans to offer a small-business lending program aimed at assisting underserved business owners in operating and expanding their businesses in Los Angeles and other areas.
The settlement involves allegations of violations from 2017 to 2020 of the Fair Housing Act and the Equal Credit Opportunity Act.
Garland said in the press release that the complaint was filed in advance of what would have been Dr. Martin Luther King Jr.'s 94th birthday.
"It is a fitting time to reaffirm our commitment to that work, and to the pursuit of justice for all Americans," he said. "The Justice Department will continue to build on our efforts to vigorously enforce federal fair lending laws and work to ensure that financial institutions provide equal opportunity for every American to obtain credit."
