First Merchants Resolves Claims of ‘Redlining’ in Indy
Muncie-based First Merchants Corp. (Nasdaq: FRME) has reached a settlement agreement with the U.S. Department of Justice regarding issues related to the Equal Credit Opportunity Act and Fair Housing Act. The DOJ says the bank had been accused of engaging in lending discrimination by "redlining" predominantly African-American neighborhoods in Indianapolis.
"Redlining" is described by the DOJ as "an illegal practice in which lenders intentionally avoid providing services to individuals living in predominantly minority neighborhoods because of the race of the residents in those neighborhoods." First Merchants says the settlement resolves all claims made by the DOJ and, as a result, the bank "denies any fault as part of the resolution."
In a news release, First Merchants said there was no actual finding or adjudication related to any matter alleged by the DOJ.
"The settlement provides an opportunity for the Bank to devote additional resources in serving the communities in which it operates, including helping meet the credit needs of all borrowers in those communities," said Michael Rechin, chief executive officer of First Merchants.
As part of the settlement, First Merchants will invest more than $1.1 million over the next four years in a special loan subsidy fund that will offer residents in majority-black census tracts in Indianapolis and Marion County access to home mortgage loans and home improvement loans. The bank will also open a full-service banking center in a majority-black census tract in the area and a new Loan Production Office with an ATM.
First Merchants will also dedicate at least $125,000 per year for four years to marketing, community outreach, education and credit repair initiatives in majority-black census tracts in Indianapolis and Marion County.
"Federal law prohibits lenders from discriminating against mortgage applicants and other potential customers based on race,” said Assistant Attorney General Eric Dreiband of the Civil Rights Division. “We commend First Merchants for cooperatively resolving this case by taking steps to ensure that its residential lending products and services are made available to everyone in Indianapolis, regardless of race."