Evolve Bank & Trust reaches settlement with DOJ on lending discrimination allegations

The U.S. Department of Justice announced an agreement with Evolve Bank & Trust on Thursday to resolve allegations the Memphis-headquartered bank engaged in lending discrimination from 2014 through 2019.

Evolve Bank, as part of the agreement, will establish a $1.3 million settlement fund to compensate affected borrowers and pay a $50,000 civil penalty. The settlement is still subject to the approval of the U.S. District Court, according to a news release.

Evolve Bank denied any liability and wrongdoing and believes it priced its mortgages fairly for all borrowers in a statement following the DOJ's announcement of the settlement.

“Specifically, Evolve confidently maintains that its annual testing of mortgage loan pricing during the 2014 through 2019 time period, which was consistent with accepted industry standards and applicable laws, showed no pattern or practice of statistically significant disparities in the Annual Percentage Rates (“APR”) that would constitute a violation of the ECOA (Equal Credit Opportunity Act) or FHA (Fair Housing Act)," the bank said in a statement.

Evolve Bank was alleged to have engaged in lending discrimination in the pricing of its residential mortgage loans through race, sex and national origin. Evolve Bank has mortgage lending offices and provides mortgage lending services in 15 states throughout the country.

“This settlement will provide deserved relief to thousands of borrowers who suffered discrimination due to Evolve Bank’s pricing policies,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division in a statement. “This case marks the Justice Department’s latest step to protect Americans from illegal lending practices and shows that we will hold lenders accountable for the effects of their discriminatory practices.”

The DOJ opened its investigation into Evolve Bank after the Board of Governors of the Federal Reserve System referred the matter as it has done in previous cases involving potential fair lending violations.

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The DOJ alleges Evolve Bank violated the Fair Housing Act and the Equal Credit Opportunity Act, which prohibit financial institutions from discriminating on the basis of race, sex or national origin in their mortgage lending services.

The complaint alleges that from at least 2014 through 2019, Evolve Bank’s loan pricing practices resulted in Black, Hispanic and female borrowers paying more in the “discretionary pricing” components of home loans than white or male borrowers for reasons unrelated to their creditworthiness, according to the news release.

Discretionary pricing is defined as the parts of a loan price that are determined by Evolve’s loan officers and managers. That includes fees, charges or rate discounts that don’t relate to the borrowers’ credit qualifications or loan characteristics.

“This settlement provides some measure of justice to those wronged by Evolve Bank’s discriminatory acts,” said U.S. Attorney Kevin G. Ritz for the Western District of Tennessee in a statement. “I also hope it sends a strong message to banks and other lenders that the Department of Justice won’t stand for unlawful barriers in residential mortgage lending. It’s past time for these practices to stop.”

Evolve has taken steps to revise its policies and practices that resulted in Black, Hispanic and female borrowers paying more for home loans than white or male borrowers, according to the DOJ.

As part of the settlement, during the four-year term of the proposed consent order, Evolve will maintain policies that reduce loan officer discretion, employ a fair lending officer who will work in close consultation with the bank’s leadership and provide fair lending training to its personnel.

"Although we feel we would have ultimately prevailed, this settlement provides an opportunity for Evolve to avoid protracted and unnecessary litigation and instead allows us to focus on helping our customers reach their housing goals," said Scott Stafford, president and CEO of Evolve Bank & Trust, in a statement. "Our team of home lending experts continues to be dedicated to fairness and equal housing opportunities for all."

Omer Yusuf covers the Ford project in Haywood County, residential real estate, tourism and banking for The Commercial Appeal. He can be reached via email Omer.Yusuf@commercialappeal.com or followed on Twitter @OmerAYusuf.

This article originally appeared on Memphis Commercial Appeal: DOJ, Evolve Bank & Trust settle on lending discrimination allegations