Financial Fraud Enforcement Task Force Settles With AIG Subsidiaries To Resolve Lending Discrimination Charges

Two subsidiaries of American International Group Inc. have agreed to pay a minimum of $6.1 million to resolve allegations that they engaged in a pattern or practice of discrimination against African American borrowers, representatives of President Obama’s Financial Fraud Enforcement Task Force ("FFETF") announced today. 

The settlement was filed today in conjunction with a complaint made by the Justice Department in U.S. District Court in Delaware. Brought under the federal Fair Housing and Equal Credit Opportunity Acts, the complaint alleges African American borrowers nationwide were charged higher fees on wholesale loans made by AIG Federal Savings Bank ("FSB") and Wilmington Finance Inc. ("WFI"), an affiliated mortgage lending company.
 
According to the Task Force, AIG FSB and WFI contracted with mortgage brokers to obtain mortgage applications that were underwritten and funded by the defendants. The complaint alleges that AIG FSB and WFI failed to supervise or monitor brokers in setting broker fees. According to the government, this practice had a disparate impact on African American borrowers, who were charged higher broker fees than white, non-Hispanic borrowers on thousands of such loans from July 2003 until May 2006, a period of time before the federal government obtained an ownership interest in American International Group Inc.
 
"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. If necessary, it will not be the last time," said Thomas E. Perez, the Assistant Attorney General in charge of the Justice Department’s Civil Rights Division.
 
According to the settlement, which is subject to court approval, AIG FSB and WFI will pay up to $6.1 million to African American customers who were charged higher broker fees than similarly-situated, non-Hispanic white customers, and will invest at least $1 million in consumer financial education efforts. AIG FSB and WFI will also be prohibited from discriminating on the basis of race or color in any aspect of wholesale home mortgage lending.
 
"Today’s settlement serves as a reminder for why President Obama established the Financial Fraud Enforcement Task Force and as an example of what you can expect to see in the future," said Executive Director of the FFETF Robb Adkins. "The type of interagency communication that spurred this case and the subsequent hard work of dedicated law enforcement professionals will be the foundation for the task force’s achievements on behalf of the American people. Moving forward, the American people should expect to see more cases, public outreach and concrete results as an outcome of our new cooperation."