AIG subsidiaries settle discrimination charges

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Submitted by admin on Fri, 03/05/2010 - 01:01

Two subsidiaries of American International Group (AIG) agreed to at least $6.1
million to settle allegations that they discriminated against
African-American borrowers.

According to the complaint filed against the companies in a Delaware court,
AIG Federal Savings Bank (FSB) and Wilmington Finance Incorporated (WFI)
charged higher fees on wholesale and mortgage loans to African-Americans.

The lenders did not deal directly with customers but funded mortgages sold by
mortgage brokers. The Department of Justice (DoJ) said that FSB and WFI
failed to monitor the brokers, who charged higher broker fees to
African-American borrowers between July 2003 and May 2006.

Thomas Perez, assistant attorney general at the DoJ’s civil rights division,
said: “Today’s settlement is significant because it marks the first time the
Justice Department has held a lender responsible for failing to monitor its
brokers to ensure that borrowers are not charged higher fees because of
their race.”

The lenders agreed to spend a minimum of $6.1 million to compensate borrowers
who paid higher fees than white customers in similar financial
circumstances. FSB and WFI, neither of which are still in the lending
business, will also spend at least $1 million on consumer financial
education programmes.

Banks across the US have been sued for similar activities. Last year the state
of Illinois accused Wells Fargo of targeting African-American and Latino
neighbourhoods for the sale of high-cost loans. Poor, African-American and
Latino families were disproportionately hit by the collapse of the sub-prime
housing market.

President Barack Obama set up the Financial Fraud Enforcement Taskforce to
co-ordinate the activities of a number of agencies in combating financial
crimes, including those of discrimination.

An AIG spokesman said that the company, which is fighting its way back to
health after the 2008 credit crisis, wanted to avoid the distraction of a
lengthy court battle over the DoJ's claims. "In the settlement, the
companies deny the allegations of the Government. Neither FSB nor WFI
countenance or condone discriminatory conduct," the spokesman said.

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