Provident Funding Associates is the subject of a consent order resolving allegations by the Justice Department and Consumer Financial Protection Bureau that it engaged in a pattern or practice of discrimination. According to the order, Provident allegedly increased loan prices for African-American and Hispanic borrowers who obtained residential mortgages between 2006 and 2011 from Provident’s nationwide network of mortgage brokers.
The settlement, which is subject to court approval, was filed in conjunction with a complaint filed in the U.S. District Court for the Northern District of California. In the Complaint, the government alleges Provident violated the Fair Housing Act and Equal Credit Opportunity Act by charging thousands of African-American and Hispanic borrowers higher fees on mortgage loans not based on borrower risk, but because of their race or national origin. The lawsuit originated from a 2011 referral by the Federal Trade Commission (FTC) to the Justice Department’s Civil Rights Division. In 2012, the CFPB joined the Justice Department’s investigation. Provident cooperated fully with the agencies’ investigation into its lending practices and agreed to settle this matter without contested litigation via the Consent Order.
Under the terms of the proposed settlement, Provident will pay $9 million dollars into a fund for the benefit of victims of its alleged mortgage lending discrimination. The proposed settlement provides for an independent administrator to contact and disburse payments to borrowers whom the agencies’ identify as victims of Provident’s discrimination, at no cost to the borrowers. Provident will pay all costs and expenses of the administrator. Borrowers who are eligible for compensation will be contacted by the administrator.
U.S. Attorney Melinda Haag, Principal Deputy Assistant Attorney General of the Civil Rights Division Vanita Gupta, and Consumer Financial Protection Bureau (CFPB) Director Richard Cordray announced the consent order.
The Justice Department will make a public announcement and post contact information on its website once the administrator begins contacting victims.
“The settlement demonstrates this U.S. Attorney’s office will devote the resources necessary to root out and address unfair lending practices that affect citizens of this district,” said U.S. Attorney Haag. “The law is clear: access to mortgage loans may not be made more difficult because of an applicant’s race or national origin. We are glad that Provident has agreed to put an end to this practice without engaging in protracted litigation.”
“The Civil Rights Division is committed to ensuring that all types of lending institutions, including wholesale mortgage lenders, comply with the fair lending laws,” said Principal Deputy Assistant Attorney General Vanita Gupta of the Civil Rights Division. “We look forward to further collaboration with the Bureau in protecting consumers from illegal and discriminatory lending practices.”
“Consumers should never be charged higher fees because of their race or national origin,” said CFPB Director Richard Cordray. “We will continue to root out illegal and discriminatory lending practices in the marketplace. I look forward to working closely with our partners at the Department of Justice to ensure consumers are treated fairly.”