Northern Trust Corp., parent company of the Northern Trust Bank and three suburban affiliates, on Thursday joined a slowly growing list of U.S. financial companies settling U.S. Justice Department lending-discrimination claims.
Northern, the nation’s 35th-largest financial institution, agreed to establish a $700,000 fund, rather than pay a fine, to compensate at least 63 African-American and Hispanic families denied home mortgages in 1992 and 1993.
A borrower denied a home loan, for example, could get anywhere from $5,000 to $40,000 under the agreement.
The Justice Department said the denials occurred because of a pattern of discrimination that resulted in “significant differences” in the treatment of white and minority applicants. The compensation fund could grow if additional discriminatory denials are discovered in Northern’s files.
“Getting a loan can sometimes be like walking through a maze,” Deval Patrick, assistant attorney general for civil rights, said in Washington.
“It is unfair for lenders to take white applicants by the hand and walk them through the loan process, while leaving black (and Hispanic) applicants on their own and then denying their applications.”
Northern is the sixth bank the government has charged with violating fair-lending practices in a steadily widening probe of discrimination by the nation’s financial industry. In the largest settlement, Chevy Chase Federal Savings Bank in Chevy Chase, Md., last year agreed to pay $11 million to satisfy government charges.
Two weeks ago, the government said it was expanding its mortgage lending investigation to include automobile lending bias by the Big Three automakers.
In Thursday’s Northern Trust case, the Justice Department charged that Northern loan officers used different standards to evaluate loan applications from whites than those used to evaluate minority applications.
The Justice Department said white applicants had overtime pay included when incomes were computed, while Hispanics and African-Americans did not.
And Northern loan officers treated the debts of a white person differently than those of a minority applicant, according to the department.
“The way it was done would indicate a minority applicant had a larger debt problem and less income than a white applicant, when, in fact, they had the same kind of debt problem and income,” said a Justice official.
Northern just wanted to get the investigation behind it.
“Although we continue to believe that our banks did not violate the fair-lending laws, we have never disagreed with the Department of Justice about the importance of adhering to the principles of fair lending,” said David Fox, Northern chariman and chief executive officer.
Fox conceded that mistakes were made, but said “none were made as a result of racial prejudice.”
And he pointed to specific efforts to expand lending to minority applicants, such as the opening of a branch at 75th and State Streets.
“We have been making for some time a concerted effort to expand the number of mortgages we have in low- and moderate-income neighborhoods,” Fox said.
Malcolm Bush, president of the Woodstock Institute, which studies bank lending patterns in the Chicago region, agreed. “If you look at Northern’s originations over the last three years, the originations to minorities have more than tripled,” he said.
