Sage Bank, a small community bank in Lowell, will spend $1.2 million to settle allegations by the US Department of Justice that it charged African-American and Hispanic borrowers more for their home loans than their white counterparts.
The bank denied any wrong-doing and said it did not intentionally discriminate against minority borrowers. It is changing its pricing policy.
African-American borrowers on average paid about $2,450 more and Hispanic borrowers $1,440 more than whites under the bank’s pricing structure, which was in place between 2011 to 2014, according to the civil complaint and consent agreement filed Monday in US District Court in Boston.
“Sage Bank’s loan pricing policies created the risk that borrowers would be treated differently based on impermissible characteristics like race and national origin, and that was in fact the result,” said Vanita Gupta, the head of the Justice Department’s Civil Rights Division, in a statement.
The bank paid loan officers more money for generating loans from borrowers who didn’t have a continuous work history or readily available tax returns, under the belief that these loans required more work, said Peter Conrad, the president of Sage Bank. Many of these borrowers were African-American and Hispanic, Conrad said.
That cost was passed on to these minority borrowers, and was not unusual among mortgage lenders, he said.
The bank will refund more than 500 borrowers affected by the policy, under the agreement. Sage has less than $200 million in assets.