Fleet to Settle Bias Lawsuit for $4 Million
Fleet Financial Group’s mortgage subsidiary will pay nearly $4 million to African American and Latino clients to settle allegations it charged them more for home loans than comparably qualified whites, the Justice Department announced Tuesday.
Fleet agreed to establish a $3.8-million fund to compensate 600 minority clients who received mortgages from branches in Westbury, N.Y., and Woodbridge, N.J., between Aug. 1, 1993, and June 1, 1994.
Fleet will spend $200,000 more on community outreach and education about home mortgages and will institute a new monitoring system to ensure compliance with a recently adopted policy of fair pricing without regard to race or national origin.
Fleet clients will receive up to $15,000 each, depending on the size of their mortgage.
The Justice Department’s civil rights division sued Fleet Mortgage Corp. and simultaneously agreed to settle the case in U.S. District Court in Brooklyn. The court is expected to approve the settlement.
The lawsuit alleges that the mortgage company, based in Columbia, S.C., charged blacks and Latinos higher interest rates or up-front fees, called overages, for home loans than similarly situated white borrowers. The government said this violated the Fair Housing Act and the Equal Credit Opportunity Act.
The company said it settled to avoid costly litigation and without admitting any violation of law.
“Loan should be based on risk, not race,” said Assistant Atty. Gen. Deval L. Patrick, head of the civil rights division. “By changing their practices, Fleet has stepped forward and done the right thing.”
Patrick said an overage generally refers to the price paid by a borrower in excess of any minimum price set by a financial institution. He said loan officers at many institutions have discretion to charge rates and fees higher than the minimum and allow the loan officers to pocket some or all of the excess price as a commission, but it is not commonly known that such prices are negotiable.
The lawsuit claimed that from January 1993 through June 1994 Fleet gave its loan officers at the two branches discretion to charge either more or less than the stated minimum prices. It said the loan officers charged more overages and granted fewer discounts to blacks and Latinos than to white borrowers with similar financial assets.
Patrick said the differences could not be explained by differences in financial standing or risk of loans. The Justice Department investigation began in September 1995 after Federal Reserve banks in Boston and Washington found similar problems in an investigation of their own.
