In a notable first, Philadelphia area-based Citadel Federal Credit Union has settled with the United States Department of Justice (DOJ), agreeing to pay $6.52 million to resolve allegations of redlining.
It’s the first time the DOJ has ever entered a redlining settlement with a credit union, a move that clarifies “our intent to hold all types of lenders accountable for their role in modern-day redlining,” according to Assistant Attorney General Kristen Clarke of the DOJ’s Civil Rights Division.
“There are well over 4,600 credit unions across America, all subject to federal laws that prohibit redlining and lending discrimination,” Clarke said. “Redlining and other forms of lending discrimination harm communities of color and families by denying them an equal opportunity to access credit, attain the dream of homeownership and build generational wealth. This settlement will expand investment in Black and Hispanic communities, particularly in Philadelphia, and increase opportunities for homeownership and financial stability.”
Redlining — the discriminatory practice of withholding credit services from communities predominantly populated by racial minorities — has been illegal since the Fair Housing Act was passed in 1968. The DOJ’s complaint alleged that Citadel failed to provide residential lending services to neighborhoods in and around Greater Philadelphia that were mainly Black and Hispanic from at least 2017 through 2021. Other lenders generated mortgage applications and originated mortgages in Black and Hispanic areas at almost three times the rate Citadel did.
The vast majority (at least $6 million) of the settlement money will go toward a loan subsidy fund to increase access to mortgages and home improvement loans for residents of majority Black and Hispanic areas in Philadelphia. Citadel will also open three new branches in predominantly Black and Hispanic neighborhoods; previously, the credit union’s physical locations were situated nearly exclusively within majority-white parts of its market footprint. Additionally, Citadel will be required to hire a community lending officer to oversee further development in minority communities; per a statement from the credit union, it had already done so as of August.
Citadel, for its part, “respectfully disagrees” with the allegations, although Bill Brown, the credit union’s president and CEO, acknowledged Citadel’s shortcomings in reaching local minority Census tracts. Citadel’s statement said that it views the settlement as an opportunity “to enhance our commitment to proactive community engagement.”
“As we look back at our history, this is a situation arising from what we weren’t doing, rather than one of intentional acts,” said Brown. “Banking has not been immune to the digital disruption that has swept across various industries for decades and Citadel’s robust focus on our digital journey shifted our strategy away from new brick-and-mortar branches in recent years, which inadvertently impacted our ability to serve our region as broadly as we had planned.”
