SunTrust Settles U.S. Discrimination Suit for $21 Million
SunTrust Banks Inc. (STI)’s mortgage unit agreed to pay $21 million to resolve U.S. allegations it charged black and Hispanic borrowers discriminatory rates for home loans.
The agreement with the U.S. Justice Department bars SunTrust from discriminating on the basis of race in setting terms for loans, and requires the bank to monitor its compliance, according to a lawsuit and settlement filed today in federal court in Richmond, Virginia. The bank will also establish a system for resolving customer complaints about discrimination.
More than 20,000 African-Americans and Hispanic borrowers paid higher fees, costs or interest rates for home mortgages than non-Hispanic, white borrowers, according to the settlement. The overcharging was based only on race and unrelated to the borrowers’ creditworthiness, according to the U.S. complaint.
Minority borrowers “paid what amounted to a racial surtax that ranged from hundreds of dollars to thousands of dollars,” said Thomas Perez, the head of the Justice Department’s Civil Rights Division. “African-American and Latino borrowers had no idea that they could have gotten a better deal.”
The Obama administration has boosted scrutiny of banks to discourage loan discrimination after the housing bust led to record defaults. In December, Bank of America Corp. paid a record $335 million to compensate Countrywide Financial Corp. borrowers who were charged more for home loans based on race and national origin.
SunTrust, based in Atlanta, denied the U.S. allegations in the complaint and said its lending practices complied with fair lending laws, according to the settlement. The bank said it accepted the settlement to avoid the costs and risks of litigation.
“SunTrust strongly believes in the principles of fair lending,” Michael McCoy, a SunTrust spokesman, said in an e-mail. “We are pleased to have reached a settlement and put this matter behind us.”
The overcharging of minority borrowers took place from 2005 to 2009 in markets that included Washington, Atlanta, Miami, Los Angeles, Orlando, Florida, and San Francisco, according to the U.S. complaint.
The Justice Department also has been investigating Wells Fargo & Co., the largest U.S. mortgage lender, and has “sufficient basis” to file a lending discrimination complaint against the San Francisco-based bank, Assistant Attorney General Perez said today on a conference call with reporters. Wells Fargo had previously disclosed a U.S. probe into the matter. Perez said the department and the bank “continue to have regular conversations” regarding the investigation.
The case is U.S. v. SunTrust Mortgage Inc., 3:12-cv-397, U.S. District Court, Eastern District of Virginia (Richmond).