A North Carolina bank discriminated against borrowers based on their marital status, the Federal Deposit Insurance Corp. said.
Crescent State Bank in Cary committed "substantive violations" of fair-lending laws, including the Equal Credit Opportunity Act, the FDIC said Friday. As a result, the agency gave the bank a rare "needs to improve" rating on its latest Community Reinvestment Act examination.
The FDIC said Crescent, a unit of the $751 million-asset Crescent Financial Corp., committed violations that "involved a pattern or practice of discrimination on the basis of marital status" and "are considered to be bank-wide."
Michael G. Carlton, the president and chief executive of the bank and the parent company, defended its lending practices and said it has taken steps to improve its fair-lending policies.
"Crescent has always had conservative lending practices," he said in an interview Friday. "We've never had any complaints, and we were not aware of this matter until it was brought to our attention."
The bank has not "had any chargeoffs or past-dues as a result of the borrower's marital status," Mr. Carlton said. He would not provide details about the nature of the alleged violations.
The Equal Credit Opportunity Act bars lenders from collecting certain information from prospective borrowers, including race and gender data and in some cases marriage information. The "needs to improve" rating was for a CRA exam completed in August 2006. For its previous CRA exam, in 2001, the bank received a "satisfactory" rating.
In the 2006 exam, the FDIC also said that the bank's overall performance in lending to low-income borrowers was "weak."
The bank met other criteria needed for a higher CRA rating, including its responsiveness to the region's community development needs through loans and other services. The agency said Crescent would have earned a "satisfactory" CRA grade if not for the fair-lending violations.
"We think our CRA performance is satisfactory as evidenced by the lending test and the community development test," Mr. Carlton said. "But due to the regulatory reliance on the technical violations, I can understand why they can give us a grade less than satisfactory."
To ensure better fair-lending procedures, the bank agreed to hold training sessions for its board members and loan officers and to revise its loan policy, the FDIC said.
The bank said it also has hired an analyst to focus on "regulatory compliance execution for the bank's lending activities" as well as a new compliance manager and operations director.
"We're trying to develop a leadership team that can take this company to the next level and keep these situations to a minimum," the CEO said.
Mr. Carlton said he was not at liberty to say whether there would be further regulatory or legal action.
