On January 18, the DOJ and JPMorgan Chase agreed to settle a federal lawsuit that alleged that the bank had discriminated against minority borrowers in violation of the Fair Housing Act (FHA) and Equal Credit Opportunity Act (ECOA). On the same day that the DOJ filed its complaint, the parties agreed to settle the matter for $55 million.
According to the complaint, between 2006 and 2009, JPMorgan had charged higher prices for residential mortgage loans on the basis of race or ethnicity. For years, JPMorgan used a network of mortgage brokers across the country. Chase gave those independent mortgage brokers discretion to change the interest rates and fees charged on mortgage loans from the rates initially set (which were based on objective criteria).
This permitted mortgage brokers to exercise discretion in setting the final price JPMorgan charged to individual borrowers, unrelated to a borrower’s credit risk characteristics. When brokers secured higher interest rates, the lawsuit alleges, they received additional compensation.
JPMorgan did not require the mortgage brokers to document the reasons for charging some customers more than others, according to the lawsuit. The DOJ alleged, however, that Chase had sufficient notice of the “widespread pricing disparities” but failed to take prompt action to eliminate those disparities or engage in adequate efforts to remedy the impact of those disparities upon borrowers.
As a result of JPMorgan’s discriminatory practices, an African-American or Hispanic borrower paid, on average, approximately $1,000 more than did a non-Hispanic white customer.
- An African-American, on an average loan amount of $191,100, paid approximately $1,126 more in fees and in higher note rate over the first five years of the loan than a white borrower.
- A Hispanic borrower paid an average of $968 more on an average loan of $236,800, the complaint said.
These borrowers, the lawsuit alleged, collectively suffered “tens of millions of dollars in damages.”
JPMorgan denied the allegations: “We’ve agreed to settle these legacy allegations that relate to pricing set by independent brokers. We deny any wrongdoing and remain committed to providing equal access to credit.”