Community State Bank, of St. Charles, Mich., has agreed to open a loan office in Saginaw, Mich., to settle a Justice Department lawsuit alleging it discriminated against African-Americans.
The Department of Justice said Tuesday that Community State did not make any home loans in Saginaw or Flint, Mich., from 2006 to 2009, though the bank did provide home loans in nearby predominantly white neighborhoods.
Under the settlement, Community State will invest roughly $165,000 to open the loan office and will provide $75,000 in down payment assistance in majority African-American neighborhoods. The bank also will invest $15,000 in advertising for potential customers and will conduct fair-lending training for its employees.
"The complaint filed today shows that the practice of drawing lending areas with boundaries that exclude borrowers in predominately minority neighborhoods is not just a shameful historical practice," said Thomas E. Perez, assistant attorney general for the Justice Department's civil rights division. "We are pleased that Community State Bank will improve access to responsible and affordable credit to qualified borrowers in Saginaw's minority neighborhoods."
Robert Wolak, Community State's president, said the $201 million-asset bank originated just 93 home loans in 2011 and did not consider itself to be in any of the markets cited by the Justice Department. Community State has one office in Saginaw that is roughly six miles from the city's downtown. It has no offices in Flint.
"We were on the fringe of these markets and our [Community Reinvestment Act] map didn't cover these markets and we didn't lend in them," Wolak said in an interview Tuesday.
The complaint alleges that Community State violated the fair Housing Act and Equal Credit Opportunity Act, which prohibit financial institutions from discriminating on the basis of race in their lending practices.