February 26, 2024

First National Bank to Pay $13.5 Million to Settle Redlining Allegations in North Carolina

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In a significant development, federal and state officials have revealed instances of racially motivated discrimination against Black and Hispanic individuals seeking mortgages in two major North Carolina cities. The U.S. Department of Justice, led by Kristin Clark, the head of the Civil Rights Division, disclosed on Monday that First National Bank would pay $13.5 million to settle allegations of redlining in Charlotte and Winston-Salem, persisting until 2021.

Redlining, a discriminatory practice rooted in the nation’s history of racial segregation, has been a focus of investigations by President Joe Biden’s administration. The policy restricts equal access to credit and opportunities for wealth-building through homeownership in communities of color.

Clark emphasized the detrimental impact of redlining, stating, “It harms communities of color by limiting equal access to credit and shutting off opportunities to build wealth via homeownership.” She revealed that her office had previously reached similar settlements addressing discriminatory lending practices in various states, and efforts would persist to combat the practice nationwide.

As part of the settlement, First National Bank has committed to opening three new branch offices in heavily minority-populated areas of Charlotte and Winston-Salem. The bank will also engage in community outreach initiatives, offering financial education, credit counseling classes, and more to foster financial inclusion.

The investigation, spearheaded by U.S. Attorney for the Middle District of North Carolina Sandra Hairston, exposed concerning patterns of discriminatory lending practices by First National Bank. The bank, which acquired Raleigh-based Yadkin Financial in 2017, was found to be four times more likely to approve mortgages for white individuals compared to Black or Hispanic applicants in Winston-Salem. Similarly, in Charlotte, the bank was 2.5 times more likely to favor white applicants over minority groups.

North Carolina Attorney General Josh Stein emphasized the importance of addressing racial wealth gaps and preventing discrimination in lending. “When lenders discriminate, it means hard-working people can’t buy a house, start a business, or invest in their futures,” Stein noted, highlighting the impact on communities and the need for fair access to financial opportunities.

The discriminatory lending practices uncovered in North Carolina underscore broader concerns about systemic racism and the enduring legacy of discriminatory policies in the financial sector. The settlement aims to rectify past injustices and promote financial equity in these communities.

Financial Desk

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