Lakeland Bank, DOJ reach $13M settlement over redlining allegations

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The U.S. Justice Department announced an agreement with Lakeland Bank Sept. 28 to resolve allegations that the bank engaged in a pattern of lending discrimination – also known as redlining – around the Newark area, including in neighborhoods in Essex, Somerset and Union counties.

Redlining is an illegal practice where lenders avoid providing credit services to individuals living in communities of color because of the race, color or national origin of the residents in those communities.

The $13 million resolution, which is the third-largest redlining settlement in department history, is part of DOJ’s nationwide Combating Redlining Initiative.

“Financial institutions that refuse to provide mortgage lending services to communities of color not only contribute to the persistent racial wealth gap that exists in this country, but also violate federal law,” said U.S. Attorney General Merrick Garland. “The agreement with Lakeland announced today represents the Justice Department’s continued commitment to addressing modern-day redlining, and to ensuring that all Americans have equal opportunity to obtain credit, no matter their race or national origin.”

The complaint filed in federal court alleges that from at least 2015 to 2021, Oak Ridge-based Lakeland failed to provide mortgage lending services to Black and Hispanic neighborhoods in the Newark metropolitan area, that all its branches were located in majority-white neighborhoods, and that its loan officers did not serve the credit needs of Black and Hispanic neighborhoods in and around Newark.

“Redlining creates an unequal playing field that unfairly prevents many persons of color from achieving the dream of home ownership, and this type of systemic and intentional discrimination cannot and will not be tolerated,” said U.S. Attorney for the District of New Jersey Philip Sellinger. “It is wholly unacceptable that redlining persists into the 21st century, and this case demonstrates our commitment to combating redlining and hold banks and others accountable when they engage in unlawful discrimination. Through this agreement, we are taking a major step forward by removing unlawful and discriminatory barriers in residential mortgage lending.”

“While we strongly disagree with any suggestion we have acted improperly, Lakeland Bank has fully cooperated throughout the process and remains confident that we have been fully compliant with all fair lending laws,” said Thomas Shara, president and CEO of Lakeland Bank. “This resolution avoids the distraction of protracted litigation and allows us to focus our time, expertise, and resources towards achieving a shared goal of meeting the credit needs of all residents within our communities, including those who historically have been underserved.”

As part of a proposed consent order, which was filed Wednesday in district court in New Jersey and is subject to court approval, Lakeland agreed to:

• Invest at least $12 million in a loan subsidy fund for residents of Black and Hispanic neighborhoods in the Newark area; $750,000 for advertising, outreach and consumer education; and $400,000 for development of community partnerships to provide services that increase access to residential mortgage credit.
• Open two new branches in neighborhoods of color, including at least one in Newark; ensure at least four mortgage loan officers are dedicated to serving all neighborhoods in and around Newark; and employ a full-time community development officer who will oversee the continued development of lending in neighborhoods of color in the Newark area.
• Maintain an expanded Community Reinvestment Act Assessment Area that includes Essex, Somerset and Union counties.

As part of the outreach effort, Lakeland also says it will conduct 20 events for real estate brokers and agents, developers, and public or private entities engaged in residential real estate-related business with the above mentioned four mortgage loan officers assigned to support those commitments.

“We will build upon our existing efforts to better serve our customers and the communities in which we operate,” said Shara. “Lakeland Bank continues to work diligently to help our customers reach their financial goals, respond to the evolving needs of consumers and businesses and lend support to all communities we serve by investing in programs that foster economic opportunity, health and education.”

ICYMI

On Sept. 27, Lakeland and Provident Bank announced entering a merger agreement valued at approximately $1.3 billion. Read more here.