Hudson City Savings Bank agreed Thursday to pay a $32.75 million settlement to settle allegations that it avoided extending mortgage credit in black and Hispanic neighborhoods.
NEWARK -- Hudson City Savings Bank agreed Thursday to pay a $32.75 million settlement to settle allegations that it avoided extending mortgage credit in black and Hispanic neighborhoods.
The agreement is the largest mortgage redlining settlement in the history of the U.S. Department of Justice, the department said in a release.
A Justice Department complaint alleged that Hudson City violated the Fair Housing Act and Equal Credit Opportunity Act, which prohibit financial institutions from discriminating based on race. The complaint said between at least 2009 and 2013, the bank failed to meet credit needs in majority black and Hispanic neighborhoods in New Jersey, New York City, Bridgeport, Conn., Philadelphia and Camden and their surrounding areas.
Hudson City, headquartered in Paramus, agreed to settle without litigation.
"Hudson City Savings Bank structured its business operations to systematically avoid providing credit services in predominately minority neighborhoods," U.S. Attorney Paul Fishman said. "There is no room for such behavior in our banking system."
Under the terms of the settlement, Hudson City will invest $25 million into a loan subsidy fund to extend credit in majority black and Hispanic neighborhoods in its market areas, the Justice Department said. The bank will also invest $2.25 million for advertising, outreach, financial education and community partnership efforts and open two full-service branches in these neighborhoods.
Hudson City must also develop internal controls to ensure compliance with fair lending laws, provide training to employees and create a plan to increase lending in redlined areas, the department said. The bank will also pay a $5.5 million civil penalty.
In a statement, Hudson City said it disagreed with the statistical analysis of loans used by the Justice Department and Consumer Financial Protection Bureau to make the allegations against the bank, but signed off on the settlement to avoid litigation.
"In the Bank's view, the Agreement will help supplement the Bank's strong record of serving the needs of all communities within its geographic reach in a fair and honest manner for over 150 years," Hudson City said.
The bank is in the midst of a merger with M&T Bank Corporation, which, if completed, will better serve minorities, Hudson City said.
"Although we do not agree with the DOJ's and CFPB's claims against the Bank, we agree, and have always believed, that there should be no discrimination based on race, national origin, gender or age in obtaining a loan," Denis J. Salmone, Chairman and CEO of Hudson City, said.
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