Jiang Haiyun/Bloomberg
Content containing racial slurs became the focus of the accusation last year when the Justice Department alleged redlining in emails from Bank of Oklahoma. One bank executive forwarded an email that declared, “Proud to be white!” and used the “N” word. ” and other racial slurs.
In another redlining case against Trident Mortgage, the Justice Department described how loan officers, assistants and other employees received and distributed emails containing racial slurs and content that used racial tropes and terminology. Communications sent via work email included a photo showing a senior loan officer posing with colleagues in front of a Confederate flag, as well as derogatory content related to real estate and appraisals, as well as content targeting people who live in majority-minority neighborhoods. . Trident, owned by Warren Buffett’s Berkshire Hathaway, settled a DOJ complaint in 2022 for $24 million.
Racist emails have received increased attention from the Justice Department and the Consumer Financial Protection Bureau since the Justice Department launched its Combating Redlining Initiative in late 2021 as a sign that racial bias has seeped into company culture.
The discriminatory emails were not used by themselves to allege redlining, but were combined with key lending statistics showing how lenders compared with their peers in originating loans in minority communities and whether lenders avoided branching out in minority communities. The agency or hiring loan officer… all taken together, are used to show intentional discrimination.
In some cases, these emails help regulators distinguish between lenders that do not offer equal access to credit.
Banks rarely fight back against redlining claims, often opting to settle such cases, often citing the cost and disruption of protracted litigation as reasons for reaching agreements with authorities. But some legal experts say financial institutions have little control if racist emails are sent. Sent to employees from outside the company. Distinctions are made when company employees send discriminatory emails or forward them to others without comment.
“Holding companies accountable for employees’ opinions or comments, even if those comments are inconsistent with the company’s values and culture, places the burden on companies to vet employees to avoid being labeled as a discriminatory lender.” Represents Oklahoma said Andrea Mitchell, managing partner at Mitchell Sandler at Bank of America in Maryland.
She added: “Employers are limited in their ability to block emails that are racially insensitive or share personal views in order to exercise their right to free speech.”
Still, legal experts are quick to point out that discrimination is illegal. Employees have no First Amendment rights when using the company’s communications systems.
“If there’s a racist joke or an employee says they’re proud to be white, they’re not going to file many lawsuits on free speech grounds because no one is punishing employees for saying those things. They’re just using it as a Evidence supporting discriminatory intent,” said David E. Bernstein, a law professor at George Mason University Law School.
Lisa Rice, president and CEO of the National Fair Housing Alliance, recalled frequently sending emails, text messages and audio and video recording requests while working at the Toledo Fair Housing Center nearly two decades ago. These included a series of specific racial slurs.
“We have always been able to use oral or written public statements as evidence in fair housing and fair lending cases,” Rice said. “You can request that emails be turned over, and those emails can be used as evidence and evidence of discrimination.” They may even be used as evidence of discriminatory intent. “
She added that regulators “may not have gone all out” in the past using emails to support claims of intentional discrimination.
To be clear, racist emails have been uncovered in a handful of redlining cases currently brought by the Department of Justice.
While scouring hundreds of thousands of emails or texts is an arduous task, sophisticated tools, including those that leverage artificial intelligence, can make rooting out racist terms easier. In some cases, it may only be a small number of hundreds of emails. Thousands.
“This is an old-school red line for using new technology,” said Ken Thomas, president of Community Development Fund Advisors and an expert on the Community Reinvestment Act, which requires banks to lend to low- and moderate-income communities. , about 60 percent are minorities, he said.
If there were racist jokes or employees said they were proud to be white, they wouldn’t litigate much on free speech grounds because no one would punish an employee for saying those things. They simply use it as evidence to support a claim of discriminatory intent.
David E. Bernstein, Professor, George Mason University Law School
Thomas said regulators were looking for hard evidence in the digital age.
“They’re going through emails, Instagram, text messages, looking through all communications. This is not just a smoking gun. This is a gun with fingerprints and blood on it,” Thomas said.
Bernstein agreed, adding that the emails are often used as supplemental evidence to get banks or lenders to agree to a settlement rather than taking the case to trial.
“Some of the emails might actually be indicative of a racially charged environment where you don’t really trust people not to discriminate, and some of the emails might just be from some teenagers who are sending things they really shouldn’t be sending. Stupid or stupid joke, but in any case, it would not look good to the jury or the public,” he said. “If it went to a jury, the government would say, ‘Look, these five emails show the racist environment in which people worked. ‘That’s a very effective strategy. “
Since Attorney General Merrick Garland announced the Combating Redlining Initiative in 2021, the department has secured more than $122 million in funding from 12 banks and mortgage lenders to address redlining allegations. The Justice Department is working with its Civil Rights Division and the U.S. Office of Litigation and in coordination with the Justice Department. U.S. Office of the Comptroller of the Currency and CFPB. Garland said the Justice Department is handling 25 redline cases.
Garland talked about how lenders break the law through redlining, and he made it a priority to crack down on lenders to right past wrongs. He also highlighted that the gap in home ownership is wider today than it was in the 1960s. According to the U.S. Census Bureau, the current homeownership rate for whites is 74%, while for blacks it is 45%, a difference of 29 percentage points. In 1960, the homeownership rate was 65% for whites and 38% for blacks, a difference of 27 percentage points.
The homeownership gap is wider now than before the passage of the Fair Housing Act of 1968, which banned discrimination in home loans. The Justice Department often uses the law to bring discrimination cases against lenders. Additionally, the CFPB has jurisdiction over the Equal Housing Credit Opportunity Act, which prohibits discrimination in any aspect of credit transactions.
“Redlining remains an ongoing form of discrimination that harms minority communities,” Garland said at a 2021 news conference when the Justice Department first announced the redlining initiative.
He also said, “Redlining is a practice of the past era, goes against the principles of fairness and justice, and has no place in our economy today.”
Rice said the rise in redlining cases shows lenders need more training in compliance management and fair lending.
“Federal regulators conduct fair lending training every year, and HUD provides various trainings on fair housing best practices to understand what best practices are and what you should and shouldn’t do,” she said.
Still, some experts are concerned that inflammatory emails have become the centerpiece of some fair lending investigations.
“For decades, federal regulators have been effectively investigating and pursuing redlining claims without having to comb through emails and text messages that have absolutely nothing to do with loans and branches,” said Mitchell, the U.S. Bank attorney in Oklahoma.
She also advises banks to resist claims that are false, inflammatory or damaging to the bank’s reputation.
In the Oklahoma Bank of America case, the Justice Department’s complaint to the court cited the 1921 Tulsa Race Massacre, in which white rioters killed as many as 300 people, according to some reports. The tragedy devastated the city’s black cultural business district known as the Greenwood District.
The $313 million bank in Collinsville, Okla., strongly disputes any connection between the current red-line charges against it and the Holocaust because it was founded in 1998, nearly 80 years after the massacre. . A magistrate judge sided with the bank and struck out two passages from the complaint that mentioned the massacre. The rest of the command remains unchanged.
There are also concerns that using racist emails could label companies as racist, even if the settlement requires lenders to build relationships and expand credit in minority communities.
In the case of Oklahoma Bank of America, the settlement requires it to provide $1 million in loans to Tulsa’s black and Hispanic communities.
“Obviously, this has all kinds of unintended consequences,” said Bernstein, a law professor at George Mason University.
“It’s an interesting paradox. We’re going to declare you a racist and say now go lend money to people who we just told them they shouldn’t trust you. They make it harder for these companies to lend and for people to borrow money from They are there or recruiting members of minority groups to join their staff,” he added.
