The U.S. Department of Justice (DOJ) announced on Thursday a $6.5 million agreement with Citadel Federal Credit Union to settle allegations of lending discrimination in certain neighborhoods of Philadelphia with majority Black and Hispanic populations.
This is the DOJ’s first redlining settlement involving a credit union. The sector includes 4,600 financial institutions across America, which are subject to federal laws, including those pertaining to redlining and other forms of discrimination.
According to the DOJ complaint, Citadel discouraged applications from — and failed to provide mortgage lending services to — majority Black and Hispanic neighborhoods in the Philadelphia area from at least 2017 through 2021. As a result, peer lenders originated three times as many mortgages in areas where these groups were predominant.
In addition, Citadel Federal had no branches in Philadelphia, which contains “more than 75% of the majority-Black and Hispanic neighborhoods and 34% of the total population in Citadel’s market area,” per the complaint filed in U.S. District Court for the Eastern District of Pennsylvania.
In a written statement, Citadel president and CEO Bill Brown said: “While Citadel respectfully disagrees with the allegations regarding our lending practices, we view this settlement as a vital opportunity to enhance our commitment to proactive community engagement.”
Brown added that this situation arose “from what we weren’t doing, rather than one of intentional acts. He said that the company’s focus on the digital journey shifted its strategy away from new brick-and-mortar branches in recent years, impacting its ability to serve areas such as Philadelphia, which remains part of its growth plan.
“We acknowledge that our efforts did not allow us to reach majority Black and Hispanic census tracts in Philadelphia. This settlement marks a significant milestone in our ongoing journey towards creating a more inclusive and equitable future for all communities in our service area.”
Citadel has $6 billion in assets and 263,000 members. It operates 24 branches in Greater Philadelphia.
The settlement, subject to court approval, requires the credit union to invest at least $6 million in a fund, open three new branches, and hire a community lending officer to improve home lending in Philadelphia’s majority Black and Hispanic neighborhoods.
The case makes clear “our intent to hold all types of lenders accountable for their role in modern-day redlining,” assistant attorney general Kristen Clarke of the DOJ’s civil rights division said in a statement.
“This settlement will expand investment in Black and Hispanic communities, particularly in Philadelphia, and increase opportunities for homeownership and financial stability,” Clarke said. “Residents of communities harmed by unlawful redlining will finally be able to access credit services from Citadel in their own neighborhoods, including at the new branches required by the settlement.”
Citadel’s settlement is the latest from the DOJ’s Combating Redlining Initiative, which has reached 14 agreements, including $144 million in relief for communities of color, since 2021.