Special Alert : DOJ Announces Creation of a Fair Lending Unit
January 14, 2010
This afternoon, Assistant United States Attorney General Thomas Perez announced the creation of a new fair lending enforcement unit within the Civil Rights Division of the United States Department of Justice (DOJ). The new unit, announced by Perez at the "Wall Street Project" Conference hosted by the Rainbow/PUSH Coalition, is expected to consist of at least four attorneys, an economist, and six additional staff members.
The new unit was established in connection with an initiative, by the Obama administration, to enhance scrutiny of the lending practices of financial institutions and bolster enforcement of fair lending laws. The DOJ currently is involved in at least 38 fair lending investigations and the new unit is expected to increase this figure substantially. New investigations are likely to focus on "reverse redlining," a relatively novel theory of discrimination. Reverse redlining cases are predicated on the claim that a lender discriminated against a protected class of borrowers, such as a members of a racial or ethnic minority group, by offering them loans on less favorable terms than similarly situated borrowers who were not members of a protected class.
Reverse redlining claims have featured prominently in recent fair lending cases, such as the City of Baltimore’s suit against Wells Fargo. Mayor and City of Baltimore v. Wells Fargo Bank, N.A., & Wells Fargo Fin. Leasing, Inc, No. 1:08 CV-00062 (D. Md. Jan. 6. 2010) (granting defendant’s motion to dismiss). The City of Baltimore’s case against Wells Fargo was dismissed on January 6, 2010.
Although reverse redlining claims are difficult to prove, Ohio Attorney General Richard Cordray recently stated that he and other state and federal officials have been collaborating to develop legal theories that may be used to pursue such claims. The financial services industry should expect to see a significant uptick in actions by federal and state regulators which allege reverse redlining. For a copy of the Assistant Attorney General’s announcement, please see http://bit.ly/qkTpHQ.