PHILADELPHIA—The Justice Department has reached a settlement with Citadel Federal Credit Union, which has agreed to pay over $6.5 million to resolve allegations it engaged in a pattern or practice of lending discrimination by redlining predominantly Black and Hispanic neighborhoods in and around Philadelphia, DoJ announced.
DoJ said the agreement is the Justice Department’s first redlining settlement with a credit union.
Redlining is an illegal practice in which lenders avoid providing credit services to individuals living in communities of color because of the race, color or national origin of residents in those communities.
“This redlining settlement marks the Justice Department’s very first resolution involving a credit union, making clear our intent to hold all types of lenders accountable for their role in modern-day redlining,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “There are well over 4,600 credit unions across America, all subject to federal laws that prohibit redlining and lending discrimination. Redlining and other forms of lending discrimination harm communities of color and families by denying them an equal opportunity to access credit, attain the dream of homeownership and build generational wealth.”
Citadel Headquarters in Exton, Penn.
Discouraged People Seeking Credit
The Justice Department’s complaint, which was filed in the Eastern District of Pennsylvania, alleges that, from at least 2017 through 2021, the $6-billionCitadel, based in Exton, Penn., failed to provide mortgage lending services to majority-Black and Hispanic neighborhoods in and around Philadelphia and discouraged people seeking credit in those communities from obtaining home loans.
“Citadel’s home mortgage lending was focused disproportionately on white areas around Greater Philadelphia. Peer lenders generated mortgage applications in predominately Black and Hispanic neighborhoods at nearly three times the rate of Citadel and originated mortgage loans in these areas at more than three times the rate of Citadel,” DoJ stated in its complaint.
The complaint further alleges that Citadel’s branches are located almost exclusively in majority-White neighborhoods, with no branches in Philadelphia, which contains more than 75% of the majority-Black and Hispanic neighborhoods and 34% of the total population in Citadel’s market area.
According to DoJ, under the proposed consent order, which is subject to court approval, Citadel has agreed to invest $6.52 million to increase credit opportunities for communities of color in and around Philadelphia.
DoJ added that Citadel will:
- Invest at least $6 million in a loan subsidy fund to increase access to home mortgage, home improvement and home refinance loans for residents of majority-Black and Hispanic neighborhoods in Philadelphia
- Spend at least $250,000 on community partnerships to provide services related to credit, consumer financial education, homeownership and foreclosure prevention for residents of predominantly Black and Hispanic neighborhoods in Citadel’s market area
- Spend at least $270,000 for advertising, outreach, consumer financial education and credit counseling focused on predominantly Black and Hispanic neighborhoods in Philadelphia
- Open three new branches in predominantly Black and Hispanic neighborhoods in Philadelphia
- Hire a community lending officer who will oversee the continued development of lending in communities of color
Todd Harper
Citadel, DoJ said, also agreed to retain independent consultants to enhance its fair lending program and better meet the communities’ needs for mortgage credit. The credit union will conduct a community credit needs assessment, evaluate its fair lending compliance management systems, and conduct staff trainings.
NCUA Responds
NCUA Chairman Todd Harper stated the Justice Department’s settlement with Citadel is significant.
“It signals that federal credit unions must follow fair lending laws,” Harper said. “It signals to all communities that discrimination through redlining will not be tolerated. And, it brings communities who have been discriminated against a step closer to an equitable opportunity to access safe, fair, and affordable financial services and to closing the wealth gap.
“The NCUA maintains a strong relationship with the Justice Department’s Civil Rights Division and the department’s Combating Redlining Initiative, which investigates potential fair lending violations and helps to end discriminatory lending practices,” continued Harper. “That productive relationship will continue through our fair lending examination and referral process.”
Jim Nussle
ACU Reacts
“America’s Credit Unions is unequivocally opposed to redlining, and any other discrimination in lending,” said America’s Credit Unions President/CEO Jim Nussle. “Fair and equitable access to financial services is one of the many things that set credit unions apart from banks. When institutions fall short of that mission, America’s Credit Unions condemns those actions. Citadel Federal Credit Union committed to serve underserved populations in its field of membership and failed to fulfill that commitment. We support the efforts of Citadel’s new leadership to address these shortcomings and to reestablish trust in their communities. America’s Credit Unions will continue to work tirelessly with our members and the industry’s regulators to help fortify credit unions' service to diverse communities, which credit unions have proven they are committed to serve, time and time again.”