Major national bank to pay North Carolina $13.5 million for anti-Black, Hispanic discrimination

Black and Hispanic people in two of North Carolina's biggest cities faced racially motivated discrimination when trying to get mortgages, state and federal officials said Monday, and the bank responsible will now pay millions of dollars to stop further legal actions.

President Joe Biden's administration has been investigating allegations of modern day banks still using Redlining, a Jim Crow era policy used to enforce de facto segregation in housing. Kristen Clarke, who leads the Civil Rights Division at the U.S. Department of Justice, said First National Bank will pay $13.5 million to settle allegations of Redlining in Charlotte and Winston-Salem as recently as 2021.

Clarke said her office has already reached similar settlements for discriminatory lending practices in other states around the nation and will continue pushing to stop the practice.

"Redlining is rooted in our nation's sordid history of racial segregation, and it harms communities of color by limiting equal access to credit and shutting off opportunities to build wealth via home ownership," she said told reporters Monday after announcing the settlement.

The discriminatory lending practices began under Yadkin Financial, a Raleigh-based bank that First National Bank bought in 2017 for $1.4 billion, Clarke said, and continued on under the First National Bank banner for years after that.

First National Bank's spokeswoman, Jennifer Reel, blamed the problems in North Carolina on Yadkin Financial and said First National Bank is committed to helping minority communities access loans and other financial services, including by offering specialized grants and subsidies.

“We firmly assert First National Bank’s compliance with fair lending laws and strongly disagree with the DOJ’s allegations," Reel said in a written statement. "We cooperated fully to reach an agreement in this inherited matter as a good faith effort to avoid prolonged litigation and to maintain our focus on promoting equity and economic prosperity. We are also proud to further advance our existing commitment to ensure minority and low- to moderate-income borrowers have access to credit and vital banking resources.”

The investigation was part of a nationwide push, after Biden ordered the Department of Justice to target Redlining. Since he took office in 2021, the effort has led to over $120 million in settlements.

North Carolina Attorney General Josh Stein's office aided in the investigation, and he spoke with reporters Monday along with Clarke and other DOJ officials.

"We are making it easier for everyone to have a fair shot at a better future," Stein said. "North Carolina's unfortunately all to familiar with the racial wealth gap. ... When lenders discriminate, it means hard working people can't buy a house, start a business or invest in their futures. People who are part of the fabric of their communities are then unable to put down their roots."

In addition to the $13.5 million, First National Bank has also committed to opening three new branch offices in heavily minority parts of Charlotte and Winston-Salem — and will be doing work to not just reach out to the community but also offer financial education, credit counseling classes and more.

Clarke said that the investigation, led by U.S. Attorney for the Middle District of North Carolina Sandra Hairston, found that First National bank had been four times as likely to approve mortgages for white people compared to Black or Hispanic people in Winston-Salem, and was 2.5 times likely to do the same with prospective lenders in Charlotte. The bank also shut down branches in minority neighborhoods, she said, and failed to monitor loan officers to make sure they weren't engaging in racial discrimination.

"The doors of opportunity must be open to all in North Carolina," said Stein, a Democratic who is running for governor this year. "Because when businesses appreciate everyone's potential, that's when we see real success."

The bank's stock dropped slightly Monday morning following the Redlining announcement, although it's unclear if that was the reason why. The $13.5 million is a relatively small amount sum for First National Bank, with a market cap of more than $4.6 billion and assets totaling $44 billion as of December.