Thesettlement, which has been approved in federal district court, calls for the bank to paydamages and waive loan costs to the victims of the alleged discrimination. Most of thevictims identified are Native Americans who live on the Pine Ridge Reservation in SouthDakota. The settlement was filed in U.S. District Court in Rapid City, South Dakota, andresolves an April 1996 Justice Department suit charging the First National Bank of Gordon,Nebraska, with violating the Equal Credit Opportunity Act and the Fair Housing Act.
OCC noticed discrepancies in bank's lending practices when applicantswere Native American
The Justice Department sued the First National Bank after the Officeof the Comptroller of the Currency (OCC), the federal agency which supervises nationalbanks, examined the First National's lending practices. The OCC examination into thelending practices of the bank uncovered discrepancies in treatment of Native American loanapplicants. The OCC detailed those discrepancies in a report to the Department of Justice.
After further investigation, the Justice Department determined that untilat least March 1994, the bank charged its Native American customers considerably higherinterest rates than other customers, in violation of federal fair lending laws. Beforethat time, the bank did not use formal criteria for setting interest rates on consumerloans. Instead, the bank gave broad, unreviewed discretion to its loan officers in settingthe interest rates on the loans they negotiated.
Settlement ensures compensation and new loans to Native Americans whowere previously denied
Under the provisions of the settlement, the bank has agreed to:
- create a $175,000 fund which will be used to compensate Native American bank customerswho were victims of the alleged pricing discrimination;
- set aside a total of $100,000 to pay the fees or charges for documentation and creditbureau reports for consumer loans applied for by residents of the Pine Ridge Reservation;
- conduct a personal, money management education program for persons on the Pine RidgeReservation which will be designed to inform prospective Native American customers on howto establish and manage credit with the bank; and
- take affirmative steps to increase the pool of qualified Native American applicants foremployment at the bank, particularly for positions as loan officers.
"The ability to gain credit is crucial to the economic growth of allcommunities, large and small," said Karen E. Schreier, U.S. Attorney in South Dakota."Today's agreement will ensure that every Native American customer is treated fairlywhen seeking a loan, and will compensate those who have suffered discrimination in thepast."
Discrimination against Native Americans is not new phenomenon in theNorthwest
The settlement with First National Bank is the second settlement reached by the JusticeDepartment alleging lending discrimination against Native Americans living on or near thePine Ridge Reservation. The first settlement was in January 1994 and came against theBlackpipe State Bank, a mortgage and consumer loan lender in Martin, South Dakota (see
Loan officers at Blackpipe State Bank allegedly refused to make secured loans if thecollateral being used was located on a Native American reservation. They also allegedlyplaced credit requirements on Native American applicants which they did not place on whiteapplicants. Under that agreement, the Blackpipe State Bank created a $125,000 fund tocompensate victims of the alleged discrimination.
Over the past five years, the Department of Justice has obtained 12 settlementstotaling more than $20 million with financial institutions that allegedly engaged inlending discrimination.