On September 24, the Consumer Financial Protection Bureau and the U.S. Department of Justice announced a proposed Consent Order with Hudson City Savings Bank, whereby the mortgage lender agreed to pay $27.5 million in direct loan subsidies and community outreach programs, as well as an additional $5.5 million civil penalty.  The proposed Consent Order also requires Hudson City to establish, maintain, and monitor a number of policies designed to improve access to credit in predominantly Black and Hispanic neighborhoods.

In the jointly-filed Complaint, the CFPB and DOJ alleged that Hudson City structured its business operations to systemically avoid providing credit services in communities with predominantly minority neighborhoods.  Hudson City allegedly violated the Equal Credit Opportunity Act (ECOA) by avoiding branch locations and brokers in minority neighborhoods and excluding minorities from marketing strategies and credit assessment areas.  Hudson City disagreed with the allegations and asserted that it treats all of its customers fairly and without regard to race or national origin.

In the proposed Consent Order, Hudson City agreed to:

  • Pay a $5.5 million penalty, to be paid into the CFPB’s Civil Penalty Fund;
  • Pay $25 million to a loan subsidy program to increase access to affordable credit;
  • Spend $1 million on targeted advertising and outreach programs to affected populations;
  • Spend $750,000 on local partnerships designed to provide assistance to residents in Black and Hispanic neighborhoods;
  • Spend $300,000 on consumer education programs; and
  • Develop and monitor a fair lending compliance and training plan.

This result illustrates the increasing need for lenders to be proactive in identifying and developing strategies and operations to avoid regulatory and civil liability in this area.

A copy of the proposed Consent Order is available at http://files.consumerfinance.gov/f/201509_cfpb_hudson-city-consent-order.pdf.