PNC Agrees to Pay $35 Million to Settle U.S. Loan ProbeTom Schoenberg and Sophia Pearson
PNC Financial Services Group Inc. agreed to pay the U.S. $35 million to settle claims it charged minorities more for home loans than similarly qualified white borrowers.
National City Bank, which PNC purchased at the end of 2008, violated fair lending laws in loans made to about 76,000 black and Hispanic borrowers between 2002 and 2008, according to a complaint and proposed settlement provided by the U.S. Attorney in Pittsburgh. The filing doesn’t appear yet in public court records.
“As alleged, the bank charged borrowers higher rates not based on their creditworthiness, but based on their race and national origin,” Attorney General Eric Holder said in a statement.
Today’s case is the first fair lending action to be brought jointly by the department and the Consumer Financial Protection Bureau, the CFPB said in a statement. On Dec. 20, Ally Financial Inc. agreed to pay $80 million to the department in a lawsuit and $18 million to the bureau in an administrative settlement to resolve similar allegations involving auto loans.
The settlement covers loans originated by National City before PNC’s acquisition. PNC neither admits nor denies the allegations, according to the proposed settlement agreement, which must be approved by a federal judge.
“PNC is committed to fair lending for all,” Fred Solomon, a spokesman for Pittsburgh-based PNC, said in an e-mailed statement. “Once PNC acquired National City Bank, we took steps to improve policies and procedures governing the mortgage lending business of National City, discontinue National City’s mortgage broker channel, and discontinue certain practices reviewed by the agencies."
National City gave its loan officers and brokers the discretion to vary borrowers’ rates and fees without explanation, according to the complaint. The bank paid officers and brokers bonuses from extra costs paid by consumers, the bureau said in the complaint.
The joint investigation, which began in 2011, revealed that black and Hispanic borrowers paid as much as $228 more on their annual percentage rate than similarly situated white borrowers during each year of a loan. They also paid higher upfront mortgage loan fees or continued to pay additional interest on monthly payments, according to the complaint.
Under the proposed accord, unused settlement funds will be distributed to organizations that provide services including credit and housing-finance counseling.
The case is CFPB v. National City Bank, 13-cv-1817, U.S. District Court, Western District of Pennsylvania (Pittsburgh).