Banking While Black: Advocacy Group Takes Indiana Bank to Court Over Redlining Practices as Federal Agency Finds Lenders Continue to Discriminate

Old National Bank is one of the largest banks in Indiana, with more than 160 locations and assets of $23.7 billion. Fair Housing Center of Central Indiana, a nonprofit advocacy group, has filed a federal lawsuit against the bank claiming it has a pattern discriminatory residential mortgage lending practices against Black customers. 

Photo by Sora Shimazaki from Pexels

In early October, the FHCCI filed a complaint in the U.S. District Court Southern District of Indiana Indianapolis Division against Old National Bank based on an investigation that began in 2016 focused on the lending practices of Central Indiana financial institutions. 

FHCCI’s investigation found that Old National Bank approved more than 2,200 mortgage loans in the Indianapolis-Carmel-Anderson metropolitan area between 2019 and 2020. More than 91 percent of loan applications revealed the borrower’s race. A mere 37 Black applicants, 1.6 percent, were approved as borrowers, the report found. 

The complaint also alleges that the financial institution purposefully practiced housing discrimination against Black applicants. This, according to the FHCCI, is defined as redlining and is considered a violation of the federal Fair Housing Act. 

In its investigation, the FHCCI alleges that Old National Bank intentionally limited its residential mortgage business products to white communities.

The bank also removed several branches in Black neighborhoods — in 2010, there were six branches in areas that were at least 25 percent Black, according to census data. Currently, there are only two branches open in Black communities. 

The FHCCI met with Old National Bank representatives to discuss its practices in 2019 and as well as earlier this year. On both occasions, bank executives shared their willingness to improve their practices. Yet, their actions proved otherwise — in Marion County, for instance, only 23 loans were approved to Black borrowers between 2019 and 2020. However, according to the census, 28 percent of Marion County residents are Black. 

What Is Redlining? 

Redlining is a discriminatory lending practice that denies applicants of specific neighborhoods or communities mortgages. Sociologist John McKnight began using the term “redlining” in the 1960s to describe banks avoiding investments in specific areas based on the racial demographic of a community, as if a red line on a map had been drawn around them.

The Fair Housing Act of 1968 outlawed redlining as a practice. However, it still exists as many financial institutions have been investigated for their lending practices.  

Fighting Redlining in 2021 

The Evansville, Indiana-based Old National Bank is not the only financial institution under scrutiny for practicing redlining. A recent report released by the Consumer Financial Protection Bureau (CFPB) reveals that lenders engage in behavior that discourages minority applicants from applying for credit and mortgages. Instead, these lenders are targeting white neighborhoods — with marketing campaigns featuring white people and promoting white loan officers. 

President Joe Biden’s administration has established an initiative to further combat housing discrimination. The Department of Housing and Urban Development’s (HUD) recently announced new mortgage assistance programs through the Federal Housing Administration (FHA), making it easier for people with student debt to purchase a home. Although intended for Americans of any ethnicity, this program will make it easier for Black Americans with considerable student loan debt to buy a home. 

“Homeownership is wealth,” HUD secretary Marcia Fudge said in Business Insider. “It’s not only wealth to us, but it’s generational wealth.”  

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