On June 29, 2016, BancorpSouth Bank announced a proposed settlement and consent order with the CFPB and the U.S. Department of Justice of charges that the bank’s mortgage lending practices violated the Equal Credit Opportunity Act and Fair Housing Act by redlining majority-minority neighborhoods in the Memphis MSA and illegally discriminating against African Americans in the underwriting and pricing of certain mortgage loans. The charges stemmed from what the CFPB characterized as its first use of testers or “mystery shoppers” posing as consumers to support discrimination charges. Another unique aspect of the case is that the consent order, if approved, will require the Bank to adopt or revise diversity policies and practices as part of a written compliance plan to ensure that it does not engage in discrimination.
Under the consent order, the Bank agreed to engage a third-party compliance management system consultant to assist in the review and revision of its fair lending management system. The consultant will conduct a detailed assessment, including a review of the Bank’s diversity policies and practices in the Memphis MSA. This aspect of the assessment appears to parallel the Dodd-Frank Act diversity standards which call for regulated entities to conduct an annual self-assessment of their diversity policies and practices in four areas: (1) organizational commitment to diversity and inclusion, (2) workforce and employment practices, (3) procurement and business practices, and (4) practices to promote the transparency of organizational diversity and inclusion.
The consent order further will require the Bank to submit a written compliance plan which must include adoption or revision of its diversity policies and practices, as informed by the consultant’s findings. The consent order also touches upon several recognized diversity and inclusion practices, including that the Bank must conduct fair lending training for covered employees with an implicit racial bias component and that the Bank must develop or expand community partnerships designed to enhance financial education around credit, homeownership, and foreclosure prevention.
Ballard Spahr’s Diversity Team is working with numerous financial institutions and publicly traded companies to undertake self assessments in the diversity and inclusion arena and to adopt measures in conjunction with the Dodd-Frank Act diversity standards. On July 26, 2016, Ballard Spahr attorneys conducted a webinar on the BancorpSouth Bank consent order: “Fair Lending Lessons That Go Beyond Mortgages – The BancorpSouth Bank Consent Order.” Last July, Ballard Spahr attorneys conducted a webinar on the Dodd-Frank Act diversity standards: “Complying with the Final Diversity and Inclusion Standards.”