The United States Justice Department announced on Sept. 27 that the Washington Trust Company, a local community bank, agreed to pay $9 million to settle lending discrimination allegations occurring from 2016-2021 in Rhode Island.
According to a press release posted on the department of justice’s website , the allegations claimed that Washington Trust redlined majority-Black and Hispanic neighborhoods. Redlining is when loans and insurance are not provided to marginalized communities, creating unequal access.
A complaint was filed by the United States District Courts on Sept. 27 of 2023, alleging violations on two counts under the Fair Housing Act and the Equal Credit Opportunity Act. Redlining is prohibited under both acts.
Violations were backed with discriminatory practices dating from 2016 until 2021.
Under the Community Reinvestment Act (CRA), depository banks are required to self-identify their “assessment areas,” meaning the communities they serve, according to the complaint.
“Federal regulators look at a bank’s assessment area in evaluating whether an institution
is meeting the credit needs of its entire community,” the complaint stated.
The complaint stated that Washington Trust has never opened a branch in a majority Black or Hispanic neighborhood. Written on the company’s website, Washington Trust is the oldest community bank in the nation, founded in 1800.
According to the U.S. Census, written in the District Court’s complaint, 16% of Rhode Island’s census tract is majority-Black and Hispanic neighborhoods.
Under the CRA, Washington Trust identified Bristol, Kent, Newport, Providence and Washington Counties as its assessment area since 2016, according to the complaint.
It also stated that Providence, according to the U.S. census, has all of the majority-Black and Hispanic neighborhoods in Rhode Island. There are 12 branches located in Providence and Kent county, but, according to the complaint, none of these branches are located in a majority-Black or Hispanic neighborhood.
All of Washington Trust’s mortgage officers, according to the complaint, are assigned to branches in majority-white communities. There are no mortgage officer initiatives or training that involve outreach to majority-Black or Hispanic communities.
“Washington Trust generated disproportionately low numbers of loan applications and home loans during each year in [2016-2021] from majority-Black and Hispanic neighborhoods in Rhode Island,” stated the complaint.
From 2016-2021, other local lenders gave loans to majority-Black and Hispanic communities at more than four times the rate of the Washington Trust Company.
A statement released on Washington Trust Company’s website denied all allegations. According to the company’s statement, they entered the settlement to avoid the complexities of litigation.
“We look forward to serving our community long into the future,” Edward O. Handy III, the Washington Trust Chairman and Chief Executive Officer, said in the statement.
The company, in its statement, brought up the Washington Trust Community Lending program that creates affordable loan opportunities, and their financial literacy programs that help customers prepare to own a home.
On Nov. 19, 2021, the Justice Department announced its investigation of discriminatory activity to the Washington Trust Company.
Also, in 2011, according to the complaint, Washington Trust was made aware of their discriminatory risks. Internal reports of the company identified discrepancies in mortgage lending towards majority-Black and Hispanic neighborhoods. These reports recommended campaigns to incentivize Hispanic and Black consumers. The subsequent marketing strategy, according to the complaint, took no initiatives to combat redlining.
“Washington Trust failed to take meaningful steps to address the redlining risk identified in these reports,” the complaint stated.
According to the Justice Departments press release, under the legal consent order, Washington Trust has agreed to invest $7 million towards loan subsidies that improve housing accessibility for majority-Black and Hispanic neighborhoods. $1 million of the settlement, according to the release, will be spent on community partnerships that improve mortgage credit in majority Black-Hispanic neighborhoods. The other $1 million will be spent on advertising and outreach for those communities.
As well as $9 million in settlement funds, Washington Trust has agreed to open two branches in majority-Black and Hispanic neighborhoods with at least two mortgage officers serving them. A Director of Community Lending will also be employed to monitor lending in these communities.
Highlighted in the press release, an initiative to combat redlining was announced on Oct. 22, 2021. Since then, $98 million in relief money for victims of redlining, similar to Washington Trust’s settlement, has been obtained by the U.S. Department of Justice.