RBC-owned U.S. bank to pay $31M fine for discriminatory mortgage lending policies

An American bank owned by the Royal Bank of Canada has agreed to pay a $31 million US fine for systematically avoiding mortgages in predominately Black and Latino communities in Los Angeles.

City National was bought by Royal Bank in 2015

A City National Bank office is seen in downtown Los Angeles, California January 22, 2015. Royal Bank of Canada is pushing deeper into the U.S. wealth management business, saying on Thursday it will buy Los Angeles-based City National Corp for $5.4 billion in a deal that targets City's stable of high-net worth clients. REUTERS/Lucy Nicholson (UNITED STATES - Tags: BUSINESS LOGO)
A woman is shown outside a City National branch in Los Angeles, where the RBC-owned bank is based. (Lucy Nicholson/Reuters)

An American bank owned by the Royal Bank of Canada has agreed to pay more than $31 million US for systematically avoiding mortgages in predominately Black and Latino communities in Los Angeles.

The U.S. Justice Department accused Los Angeles-based City National Bank on Thursday of discrimination by refusing to underwrite mortgages in predominately Black and Latino communities, requiring it to pay the fine — the largest redlining settlement in the department's history.

City National — which has been a subsidiary of Toronto-based RBC since 2015 — is the latest bank in the past several years to be found systematically avoiding lending to racial and ethnic minorities, a practice known as "redlining" which the Biden administration has set up its own task force to combat.

The Justice Department says that between 2017 and 2020, City National avoided marketing and underwriting mortgages in majority Black and Latino neighbourhoods in Los Angeles County. Other banks operating in those neighbourhoods received six times the number of mortgage applications that City National did, according to federal officials.

The term "redlining" is derived from the notion that certain neighbourhoods have symbolic "red lines" drawn around them by companies who then avoid offering services in those areas "because of the race, colour, or national origin of the residents in those communities," the Department of Justice says.

The Justice Department alleges City National, a bank with roughly $95 billion US in assets, was so reluctant to operate in neighbourhoods where most of the residents are people of colour, that it opened only one branch in those neighbourhoods in the past 20 years. In comparison, City National opened or acquired 11 branches in that time period. In addition, no employee was dedicated to underwriting mortgages at that one branch, unlike branches in majority white neighbourhoods.

"Redlining is a practice from a bygone era, runs contrary to the principles of equity and justice, and has no place in our economy today" Assistant Attorney General Kristen Clarke, who leads the Justice Department's civil rights division, said in a statement. "This settlement should send a strong message to the financial industry that we expect lenders to serve all members of the community and that they will be held accountable when they fail to do so."

Attorney General Merrick Garland has prioritized civil rights prosecutions since taking the helm at the Justice Department in 2021 and the department, in the Biden administration, has put a higher priority on redlining cases than under previous administrations.

The Biden task force includes the Justice Department as well as bank regulators like the Comptroller of the Currency and the Consumer Financial Protection Bureau, and is focused not only on explicit forms of redlining but also cases where computer algorithms may cause banks to discriminate against Black and Latino borrowers.

Despite a half-century of laws designed to combat redlining, the racist practice continues across the country and the long-term effects are still felt to this day. The average net worth of a Black family is a fraction of a typical white household, and homes in historically redlined neighbourhoods are still worth less than homes in non-redlined communities.

As part of the settlement, City National will create a $29.5 million US loan subsidy fund for loans to Black and Latino borrowers, and spend $1.75 million US on advertising, community outreach and financial education programs to reach minority borrowers.

In a statement, City National said it disagreed with the Justice Department's allegations, but "nonetheless support the DOJ in its efforts to ensure equal access to credit for all consumers, regardless of race."

The Justice Department said City National co-operated as part of their redlining investigation and is working to resolve its issues in other markets, as well. 

For more stories about the experiences of Black Canadians — from anti-Black racism to success stories within the Black community — check out Being Black in Canada, a CBC project Black Canadians can be proud of. You can read more stories here.

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With files from CBC News


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