The Department of Justice and Minnesota-based KleinBank reached a settlement agreement covering charges that the bank excluded minority neighborhoods from its service area and engaged in discriminatory lending.
Back in January 2017, the DOJ accused KleinBank of “redlining,” which the DOJ defines as “discriminatory practice by banks or other financial institutions of denying or avoiding providing credit services to consumers because of the racial demographics of the neighborhood in which the consumer lives.”
According to the DOJ, none of KleinBank’s branch locations in the Minneapolis-St. Paul metro area is located in a minority neighborhood.
The DOJ claimed that from 2010 through 2015, KleinBank “structured its residential mortgage lending business in such a way as to avoid serving the credit needs of neighborhoods where a majority of residents are racial and ethnic minorities.”
KleinBank disputed these allegations, claiming that the government’s redlining accusation was baseless. “To the contrary, KleinBank has an established history of responding to all credit requests with a commitment to fairness and equal opportunity. This history is undisputed,” the bank’s president and CEO, Doug Hile, said last year.
Now, despite continuing to disagree with the government’s claims, the bank is settling with the DOJ in order to move forward.
“While we continue to disagree with the DOJ's claim and believe that it has no basis in fact, we have decided this compromise allows us to channel our resources into serving the community, specifically where the needs are great and where our special approach to engagement and commitment will have a profound impact,” Hile said Tuesday in a statement.
“KleinBank has a 111-year history of serving customers and strengthening its communities,” Hile continued. “With this agreement, we believe we are making good on our pledge to seek to be part of the solution to the challenges facing our communities, and we will continue to work cooperatively with others who share this objective.”
As part of the settlement agreement, KleinBank will revise its main Community Reinvestment Act assessment area to include all of Hennepin County, which includes the Minneapolis-St. Paul metro area.
Additionally, KleinBank will open a new branch office in the Twin Cities area. The bank is also required to conduct fair lending training, including training on redlining, for its employees and officers.
“Under the settlement, KleinBank will take a number of steps to remedy the harm alleged in the complaint and to ensure that its mortgage lending services are made available on a non-discriminatory basis,” the DOJ said in a statement.
Under the settlement agreement, the bank will invest $300,000 in a loan subsidy fund to increase the amount of it extends to residents of predominantly minority neighborhoods, and another $300,000 in advertising, outreach, financial education, and credit repair in order to improve the bank’s visibility in, and successful expansion into, its new service area, according to the DOJ.
“We are very pleased that the DOJ has dismissed this lawsuit, and we look forward to continuing to work with and serve the needs of all of our communities,” Hile added.