Federal redlining enforcement has waned in recent years, but redlining risk has not disappeared. On October 4, two consumer advocacy groups, the National Fair Housing Alliance and the Connecticut Fair Housing Center, filed a law suit accusing a Connecticut-based bank of unlawful discrimination against minority homebuyers. The suit alleges that Liberty Bank, a state-chartered bank headquartered in Connecticut, violated the Fair Housing Act by engaging in “redlining,” a term that refers to the practice of declining to lend to residents of predominantly minority neighborhoods.

According to the complaint, Liberty Bank avoided making loans in minority communities, denied minority loan applicants at higher rates than white applicants, and discouraged minority applicants from applying for credit. The complaint also accuses the bank of gerrymandering its Community Reinvestment Act assessment areas by carving out minority and low-income communities in order to avoid lending in those areas and to manipulate its lending statistics. Further, the complaint alleges that among top state lenders, “Liberty Bank has the widest racial lending disparities in refinance denials for African-American and Latinx applicants compared with white applicants, and it fails to provide refinance loans to communities of color at a rate that outstrips its peers at a statistically significant level.”

In addition to a lengthy list of statistical allegations, the complaint includes the results of in-person investigations conducted by plaintiffs at several bank branches. Specifically, the complaint alleges that plaintiffs sent six sets of testers to bank branches to inquire about obtaining mortgage loans. In each test, a minority loan applicant and a white control applicant with similar credit and income characteristics visited a branch to inquire about the possibility of obtaining a loan. According to the complaint, bank loan officers discouraged the minority testers from seeking loans, provided minority testers with significantly less information than the white control testers, and offered the minority testers less favorable terms than the white testers. The complaint seeks declaratory relief, injunctive relief, and money damages.

While the Trump administration has scaled back on fair lending and other enforcement actions against consumer credit providers, Democratic state attorneys general have promised to vigorously enforce state and federal laws to “ensure fairness and deter fraud.” The lawsuit against Liberty Bank suggests that consumer advocacy groups may become more active on these issues as well.