CFPB Orders National City Bank to Pay $35 Million for Unfair Mortgage Lending

The Consumer Financial Protection Bureau (CFPB) and the Department of Justice (DOJ) teamed up Monday to file a compliant against National City Bank and its successor PNC Bank, alleging the institution overcharged minority borrowers on mortgage loans between 2002 and 2008.

The federal agencies filed their joint complaint, which requires National City Bank, through its successor PNC Bank, to pay $35 million in restitution to harmed African-American and Hispanic borrowers the agencies allege were charged higher prices on mortgage loans compared to similarly creditworthy white borrowers.

“Borrowers should never have to pay more for a mortgage because of their race or national origin,” said CFPB Director Richard Cordray in a statement. “Today’s enforcement action puts money back in the pockets of harmed consumers and makes clear that we will hold lenders accountable for the effects of their discriminatory practices.”

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In the joint complaint, the CFPB and DOJ allege that National City Bank violated the Equal Credit Opportunity Act (ECOA), which prohibits creditors from discriminating against loan applicants on the basis of race or national origin.

The complain also alleges that National City Bank violated the Fair Housing Act, which similarly prohibits discrimination in residential mortgage lending. 

Between 2002 and 2008, National City made over 1 million mortgage loans through its retail channel and over 600,000 loans through independent brokers, according to the CFPB statement. In 2008, the company was acquired by PNC Bank.

The CFPB’s and DOJ’s investigation against National City Bank began in 2011, where the agencies suggested that the company’s discretionary pricing and compensation policies caused the discriminatory pricing differences. 

“National City gave its loan officers and brokers the discretion to set borrowers’ rates and fees,” says a statement from the CFPB. “National City then compensated the officers and brokers from extra costs paid by consumers.”

CFPB believes over 76,000 African-American and Hispanic borrowers had paid higher mortgage costs because of the alleged lending practices of National City Bank.

“This case marks the Justice Department’s latest step to protect Americans from discriminatory lending practices, and shows we will always fight to hold accountable those who take advantage of consumers for financial gain,” said Attorney General Eric Holder.

The complaint filed Monday takes into account several factors, including the age of the loans, that National City Bank no longer exists and that PNC does not employ National City’s mortgage origination policies.

Written by Jason Oliva

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