Philadelphia’s Citadel Federal Credit Union agrees to pay $6.5m to settle allegations of redlining
The US Department of Justice (DOJ) has reached a landmark agreement with Citadel Federal Credit Union, which will pay over $6.5 million to settle allegations that it “engaged in a pattern or practice of lending discrimination by redlining predominantly Black and Hispanic neighbourhoods in and around Philadelphia”.
Citadel to open three branches in predominately Black and Hispanic neighbourhoods
Redlining is an unlawful practice where lenders avoid offering credit services, such as mortgages, to individuals in communities of colour, based on the race, ethnicity, or national origin of residents in those areas.
The regulator filed a complaint with the Eastern District of Pennsylvania last week, accusing Citadel of failing to “provide mortgage lending services to majority-Black and Hispanic neighbourhoods in and around Philadelphia and discouraged people seeking credit in those communities from obtaining home loans” from “at least 2017 through 2021”.
The DOJ claims that “peer lenders” have produced mortgage applications in predominately Black and Hispanic neighbourhoods at “nearly three times the rate of Citadel” and generated mortgage loans in these areas at “more than three times the rate of Citadel”.
In addition, the credit union has been alleged to only operate branches in “almost exclusively in majority-White neighbourhoods”.
Citadel has agreed to pay over $6.52 million to settle these redlining allegations, making it the DOJ’s first redlining resolution involving a credit union.
Specifically, Citadel will allocate at “least $6 million” to a loan subsidy fund to improve access to mortgage, home improvement, and refinance loans in majority-Black and Hispanic neighbourhoods in Philadelphia.
Furthermore, it will invest $250,000 in community partnerships for financial education, credit, homeownership, and foreclosure prevention services, and $270,000 for outreach, advertising, and financial education aimed at these communities.
Under the consent order, which is still pending court approval, Citadel will establish three new branches in “predominantly Black and Hispanic neighbourhoods in Philadelphia” and appoint a community lending officer dedicated to “oversee the continued development of lending in communities of colour”.
With assets of about $6 billion and a membership of over 263,000, Citadel is the second-largest credit union in Greater Philadelphia, with a network of 24 branches.
