Case: Consumer Financial Protection Bureau v. Hudson City Savings Bank, F.S.B.
Issue: Hudson City Bancorp. Inc.’s (Hudson City) $33 million settlement with the U.S. Department of Justice and the Consumer Financial Protection Bureau over allegations of discriminatory redlining practices.
Case Summary: Hudson City agreed to pay $33 million to settle a joint investigation from the U.S. Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB) over allegations that the bank engaged in discriminatory redlining practices.
The regulators alleged that Hudson City violated the Equal Credit Opportunity Act (ECOA) by denying mortgage credit opportunity to African-American and Latino borrowers based on the racial composition of their neighborhoods. According to the complaint, when Hudson City expanded in New York and Connecticut from 2004 through 2010, the bank redlined a semi-circular pattern that almost entirely excluded four New York counties with a majority of minority residents. In addition, the complaint alleged that 94.5 percent of Hudson City’s top 50 mortgage brokers were located outside of minority neighborhoods in 2011 and 2012.
Under the terms of the settlement, Hudson City agreed to pay $25 million in loan subsidies to borrowers, $2.25 million for community programs, and a $5.5 million penalty to the CFPB. Hudson City did not admit or any the agencies’ allegations.
Bottom Line: On September 30, 2015, the Federal Reserve Board of Governors approved Hudson City’s $3.7 billion merger with M&T Bank. The merger is expected to close on November 1, 2015, pending approval by the New York State Department of Financial Services.