WASHINGTON — The Department of Justice announced a $9 million settlement and consent order Wednesday with the Westerly, R.I.-based Washington Trust Company to resolve allegations of race-based lending discrimination and redlining in the Ocean State.
The DOJ said that from at least 2016 to 2021, Washington Trust engaged in practices that systematically denied lending services to Black and Hispanic neighborhoods in Rhode Island.
"Despite expansion across the state of Rhode Island, Washington Trust has never opened a branch in a majority-Black and Hispanic neighborhood," the DOJ's release noted. "Compared to Washington Trust, over the same six-year period, other banks received nearly four times as many loan applications each year in majority-Black and Hispanic neighborhoods in Rhode Island [and] even when Washington Trust generated loan applications from [these areas], the applicants themselves were disproportionately white."
Redlining is an illegal practice in which financial institutions refuse or avoid lending to people because of their race or national origin. The complaint also alleged that Washington Trust relied on mortgage loan officers based only in majority-white areas as their main source of lending applications. The DOJ said the bank failed to take any steps to compensate for its lack of presence in black and hispanic areas.
Washington Trust — founded in 1800 — is the oldest community bank in the nation and had $7.0 billion in assets as of June 30, 2023. The firm is owned by a publicly-owned holding company, Washington Trust Bancorp, Inc.
As part of the settlement, Washington Trust agreed to a consent order — subject to court approval — which would require the bank to invest $7 million in a "loan subsidy fund" aimed at increasing majority-Black and Hispanic neighborhood residents' access to housing loans, $1 million in increasing those residents access to mortgage credit and another $1 million on outreach to these neighborhoods.
The bank will also be forced under the consent order to establish two new branches in majority-Black and Hispanic Rhode Island neighborhoods, deploy two mortgage loan officers in these neighborhoods and hire a Director of Community Lending to supervise ongoing efforts to lend to black and hispanic neighborhoods.
Even as the Department of Justice noted the bank refrained from taking legal action to contest the agency's findings, Washington Trust denied the allegations in a release Wednesday.
"We believe we have been fully compliant with the letter and spirit of fair lending laws, and the agreement will further strengthen our focus on an area that has always been important to us," stated Edward O. "Ned" Handy III, Washington Trust Chairman and Chief Executive Officer. "Rhode Island has been home to Washington Trust for 223 years and our neighbors count on us to provide affordable loan opportunities no matter where they live."
Nearly all the population growth in Rhode Island in recent decades has been driven by minority groups. According to the 2020 census, there are 180,000 Latinos or Hispanics in Rhode Island, up more than 50,000 from 2010, whereas the percentage of white Rhode Islanders has dropped to 71% from 2010, when they comprised 81% of the state. A study by PolicyLink and the University of Southern California's Program for Environmental and Regional Equity estimated that by 2040, 41 percent of Rhode Islanders will be people of color.
The crackdown on fair lending comes as part of the DOJ's Combating Redlining Initiative launched in October 2021. Since then, the department says it has secured $98 million in settlements used to rectify lending discrimination across the country.
"This settlement should send a strong message to banks regarding the Justice Department's firm commitment to combat modern-day redlining and ensure that all lenders are providing equal access to home loan opportunities to communities of color," said Assistant Attorney General Kristen Clarke of the Justice Department's Civil Rights Division.
