Citadel Federal Credit Union Settles $6.5 Million Redlining Allegations

According to an article in the Consumer Finance Monitor, the US Department of Justice announced that Citadel Federal Credit Union has agreed to pay more than $6.5 million to settle redlining allegations in majority-Black and Hispanic neighborhoods in the Philadelphia area.

From 2017 through 2021, Citadel was accused of violating the Fair Housing Act (FHA) and the Equal Credit Opportunity Act (ECOA) by failing to provide adequate mortgage lending services in these communities. The settlement, subject to court approval, marks the first redlining allegations case resolution with a credit union.

The complaint, filed in the US District Court for the Eastern District of Pennsylvania, alleged that Citadel’s lending practices excluded Black and Hispanic neighborhoods. It was further asserted that the credit union discouraged potential borrowers from these communities from seeking loans. The geographic placement of Citadel’s branches also raised concerns, as they were predominantly located in majority-White neighborhoods, with no presence in Philadelphia, where many of the affected neighborhoods are concentrated.

Under the terms of the proposed consent order, Citadel will invest $6.52 million to enhance credit opportunities for residents of predominantly Black and Hispanic neighborhoods. This includes $6 million for a loan subsidy fund to support mortgage access, home improvement, and refinance loans. Citadel also committed to opening new branches in underserved areas, hiring a community lending officer, and investing in credit counseling and financial education initiatives.

For compliance professionals, this case underscores the importance of proactive fair lending practices and the need for thorough geographic market assessments. Organizations should ensure their lending programs are not only compliant with the FHA and ECOA but also inclusive of all communities to avoid discriminatory practices such as redlining.