Citadel Federal Credit Union Settles for $6.5 Million with Justice Department Over Redlining Allegations
The Justice Department announced today that Citadel Federal Credit Union has agreed to pay over $6.5 million to resolve allegations that it engaged in a pattern or practice of lending discrimination by redlining predominantly Black and Hispanic neighborhoods in and around Philadelphia. This landmark agreement is the Justice Department’s first redlining settlement with a credit union, making this a historic achievement for the Combating Redlining Initiative.
Redlining is an illegal practice in which lenders avoid providing credit services to individuals living in communities of color because of the race, color or national origin of residents in those communities.
“This redlining settlement marks the Justice Department’s very first resolution involving a credit union, making clear our intent to hold all types of lenders accountable for their role in modern-day redlining,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “There are well over 4,600 credit unions across America, all subject to federal laws that prohibit redlining and lending discrimination. Redlining and other forms of lending discrimination harm communities of color and families by denying them an equal opportunity to access credit, attain the dream of homeownership and build generational wealth. This settlement will expand investment in Black and Hispanic communities, particularly in Philadelphia, and increase opportunities for homeownership and financial stability. 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.
NCUA Chairman Todd M. Harper released a statement following the announcement.
“The Justice Department’s settlement with Citadel Federal Credit Union is significant,” Harper wrote. “It signals that federal credit unions must follow fair lending laws. It signals to all communities that discrimination through redlining will not be tolerated. And, it brings communities who have been discriminated against a step closer to an equitable opportunity to access safe, fair and affordable financial services and to closing the wealth gap.”
U.S. Attorney Jacqueline C. Romero for the Eastern District of Pennsylvania stated, “For generations, Philadelphia’s communities of color have lacked equal access to the credit needed for homeownership. We know that redlining has a devastating impact on a family’s finances and future and results in economic and other inequalities that plague our communities for decades. We also know the transformational change that can occur when credit is made available to underserved residents, and particularly when lenders, like Citadel, establish branch locations in these neighborhoods.”
Justice’s Complaint Against Citadel Federal Credit Union
The Justice Department’s complaint, which was filed today in the Eastern District of Pennsylvania, alleges that, from at least 2017 through 2021, Citadel failed to provide mortgage lending services to majority-Black and Hispanic neighborhoods in and around Philadelphia and discouraged people seeking credit in those communities from obtaining home loans. According to the Justice Department, Citadel’s home mortgage lending was disproportionately focused on Greater Philadelphia's white areas. Peer lenders generated mortgage applications in predominately Black and Hispanic neighborhoods at nearly three times the rate of Citadel and originated mortgage loans in these areas at more than three times the rate of Citadel.
The complaint further alleges that Citadel’s branches are located almost exclusively in majority-White neighborhoods, with 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.
Under the proposed consent order, subject to court approval, Citadel has agreed to invest $6.52 million to increase credit opportunities for communities of color in and around Philadelphia. Specifically, Citadel will:
Invest at least $6 million in a loan subsidy fund to increase access to home mortgage, home improvement and home refinance loans for residents of majority-Black and Hispanic neighborhoods in Philadelphia;
Spend at least $250,000 on community partnerships to provide services related to credit, consumer financial education, homeownership and foreclosure prevention for residents of predominantly Black and Hispanic neighborhoods in Citadel’s market area;
Spend at least $270,000 for advertising, outreach, consumer financial education and credit counseling focused on predominantly Black and Hispanic neighborhoods in Philadelphia;
Open three new branches in predominantly Black and Hispanic neighborhoods in Philadelphia and
Hire a community lending officer who will oversee the continued lending development in communities of color.
Citadel also agreed to retain independent consultants to enhance its fair lending program and better meet the communities’ needs for mortgage credit. The credit union will conduct a community credit needs assessment, evaluate its fair lending compliance management systems, and conduct staff training.
“Regardless of their financial provider of choice, all consumers — especially those of modest means — deserve to be part of a fair financial system,” NCUA Chairman Harper continued. “The NCUA’s fair lending efforts aim to create a financial system that works for all Americans, regardless of their race, ethnicity, age, sex, orientation, marital status, religion or disability. By working to enforce fair lending and consumer financial protection laws, the NCUA is ensuring that the American system of cooperative credit remains faithful to its mission of ‘people helping people.’”
The NCUA has established a dedicated fair lending supervision division and more than doubled its annual fair lending compliance examinations. The agency said it remains fully committed to supervising for compliance with the Fair Housing Act and the Equal Credit Opportunity Act in its examination practices. The NCUA said it regularly refers credit unions to the U.S. Department of Justice when the regulator identifies patterns or practices of discrimination and requires appropriate relief for harmed consumers. For 2023 and 2024, these referrals affected more than 75,000 consumers.
A copy of the complaint and information about the Justice Department’s fair lending enforcement work can be found at www.justice.gov/fairhousing. Individuals may report lending discrimination by calling the Justice Department’s housing discrimination tip line at 1-833-591-0291 or submitting a report online.