The Bank of America received a record $335 million fine this week for racial discrimination against African-American and Hispanic mortgage customers.
According to the US Justice Department, the bank’s Countrywide Financial business charged some 200,000 perfectly eligible African-American and Hispanic borrowers higher rates of interest on their mortgages “solely because of their race or national origin” between 2004 and 2008.
The justice department said that Countrywide had abused these borrowers’ trust, by charging Hispanic customers higher rates after making a big deal out of the fact that its offices employed Spanish-speaking staff – a practice that its civil rights division head Thomas Perez described as “discrimination with a smile.”
Mr Perez’s division is still in the process of investigating around 20 other similar cases of alleged discrimination by other mortgage lenders.
In a press conference yesterday, District of Columbia Attorney General Eric Holder stressed that “these institutions should make judgements based on applicants’ creditworthiness, not on the colour of their skin.”
Countrywide was actually taken over by Bank of America after these dates, but the fine was still applicable, the department ruled. Although it accepted the fine and agreed to pay, bank spokesman Dan Frahm stressed that the institution did not practice or condone different rates of mortgage lending based on ethnicity.
Sub-prime mortgages were the stock in trade of Countrywide, which also stood accused of granting the loans to customers without checking on their suitability or creditworthiness – a key factor in what become known as the 2008 credit crunch.
The institution was known for “steering” ethnic minority borrowers into the sub-prime mortgage sector – which charged higher fees and interest rates – while granting white borrowers with the same credit rating prime mortgages.