ESSA Bank settles redlining case for $3M

Lender engaged in discrimination in communities of color, Justice Department says

(Photo Illustration by The Real Deal with Getty)

(Photo Illustration by The Real Deal with Getty)

The Justice Department has settled another case involving alleged redlining by a real estate lender, this time in the Philadelphia area.

ESSA Bank & Trust agreed last week to pay more than $3 million to settle claims that it engaged in a pattern of lending discrimination between 2017 and 2021 against people living in majority-Black and Hispanic neighborhoods in the Philadelphia metropolitan area over a period of four years, according to a press release

Under the proposed settlement, ESSA will invest nearly $3 million in a loan subsidy fund to increase access to credit for home mortgage, improvement and refinance loans, and home equity loans and lines of credit in neighborhoods where the majority of residents are people of color.

ESSA also agreed to pay $125,000 on community partnerships and $250,000 on outreach, education and counseling to expand services to those communities. The bank is also required to hire two new loan officers in its West Philadelphia branches and conduct a study to identify the needs for financial services in communities of color. The settlement still has to be approved by a court.

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“For too long, residents of communities of color have been unlawfully denied equal access to credit and shut out of economic opportunities,” Assistant Attorney General Kristen Clarke, of the Justice Department’s Civil Rights Division, said in the statement. “When banks engage in redlining, they perpetuate existing patterns of segregation and widen the racial wealth gap in our country. This resolution makes clear our commitment to holding banks and financial institutions accountable for modern day redlining while ensuring access to fair lending in communities of color.”

The Justice Department has prioritized redlining cases since October 2021 under its Combatting Redlining Initiative.

In July 2022, a former mortgage lender with ties to Warren Buffett, Trident Mortgage Company, agreed to pay $20 million in the second-largest settlement of a redlining case in Department of Justice history. The company, which no longer provides lending services, will also be required to contract another lender to provide services to affected communities.

In September 2022, Lakeland Bank, which operates out of northern New Jersey and the Hudson Valley, agreed to create a $12 million homeownership fund. It will also open two new branches and increase mortgage lending in underserved communities of color in northern New Jersey.