Justice Department takes action for the first time against a credit union following redlining allegations

Last week, the United States Department of Justice (DOJ) announced that it is working towards a resolution for allegations of “redlining” by Citadel Federal Credit Union, located in the greater Philadelphia area. As part of the resolution, $6 billion Citadel will pay over $6.5 million to increase credit opportunities in predominantly Black and Hispanic neighborhoods in the city.

Redlining is the discriminatory practice of denying access to financial services such as mortgages and other loans by avoiding population centers that are predominantly inhabited by racial and ethnic minorities. The term originated from the New Deal when maps of metropolitan areas were color-coded to indicate where it was safest to insure mortgages. African-American neighborhoods were colored red to indicate that the neighborhoods were high risk. The Fair Housing Act of 1968 worked to end the practice, making redlining illegal.

The DOJ alleged that from at least 2017 through 2021, “Citadel provided mortgage lending services to majority-Black and Hispanic neighborhoods in and around Philadelphia at rates far below that of comparable lenders. During the same time frame, peer lenders generated mortgage applications in predominantly Black and Hispanic neighborhoods at nearly three times the rate of Citadel and originated mortgage loans in those neighborhoods over three times as often.”

Citadel allegedly also focused most of its outreach, marketing, and lending to predominantly White suburbs in the greater metro area. And while Citadel’s market area includes the city, where 75% of the majority-Black and Hispanic neighborhoods reside as well as 34% of the total target population, only one branch was opened there.

 

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