City National Bank has agreed to pay $31 million to settle claims brought by the Department of Justice alleging the bank committed lending discrimination in Los Angeles County.

The DOJ recently announced the multi-million dollar settlement with City National, Los Angeles County’s largest bank, which resolved claims that the bank used unlawful “redlining” to discriminate against prospective borrowers. Redlining refers to the practice of marking off sections of the map that are predominantly populated by people of certain races, colors, or national origins. The bank will then avoid providing credit services to individuals living in the marked-off areas.

Redlining is prohibited by the federal Fair Housing Act and the Equal Credit Opportunity Act. The $31 million payout marks the largest redlining settlement in the Department’s history.

According to the DOJ’s complaint, City National had been avoiding providing mortgage lending services to majority-Black and Hispanic neighborhoods across Los Angeles from at least 2017 through 2020. City National maintained only three of its 37 branches in majority-Black and Hispanic neighborhoods, despite those neighborhoods accounting for over 50% of Los Angeles census tracts. The only new City National branch to open in a majority-Black or Hispanic neighborhood in the last 20 years was not even staffed with an employee tasked with generating mortgage applications. The bank actively discouraged residents of those communities from applying for mortgages and other services, and promoted an internal culture of preferring existing, majority-White customers.

Per the settlement, City National must invest at least $29.5 million in a loan subsidy fund for majority-Black and Hispanic neighborhoods in LA County. The bank must spend additional funds on advertisements, outreach efforts, and financial education programs for residents of these neighborhoods. City National also agreed to open at least one new branch in one of the neglected neighborhoods and make other efforts to expand loan services in those areas.

City National is hardly the first bank to engage in racial redlining. It’s a practice dating back to the 1930s, and it's been unlawful for more than 50 years. Although federal and state agencies work to curb the conduct, studies show that redlining persists nationwide. According to a thorough review of Home Mortgage Disclosure Act records by nonprofit newsgroup The Center for Investigative Reporting, redlining targeting Black and Hispanic neighborhoods was identified “in 61 metro areas even when controlling for applicants’ income, loan amount and neighborhood.” Problematic cities included major metropolitan areas across the country such as Atlanta, Detroit, Philadelphia, Gainesville, Iowa City, and other locales.

Redlining and other racially-charged lending practices perpetuate the wealth gap and serve as a self-fulfilling cycle preventing certain neighborhoods from developing. The enforcement action against City National was brought as part of a DOJ initiative, launched by Attorney General Garland in 2021 to combat the practice. Since the initiative was established, the DOJ has announced five cases or settlements totaling upwards of $75 million in relief for affected communities.