Officials for SouthEast Bank in Tennessee agreed to pay a $1.5 million settlement after the Department of Justice on Saturday filed a federal complaint accusing the bank of disproportionately denying student loan financing requests from blacks and indigenous Americans. Image by the Department of Justice
Jan. 20 (UPI) — Officials for Tennessee’s SouthEast Bank agreed to pay $1.5 million to settle federal claims accusing the bank of discriminating against black and aboriginal graduates seeking to refinance their student loans.
The settlement resolves claims made by the Department of Justice accusing the bank of engaging in lending discrimination by allegedly disproportionately discouraging or denying student loan refinancing requests made by black and aboriginal college graduates.
“Everyone in our country should have a fair chance and equal opportunity to refinance a school loan,” Assistant Attorney General Kristen Clarke said Sunday in a news release.
“By rejecting graduates based on where they obtained the degree, SouthEast Bank’s policy denied and discouraged Black, American Indian and Alaska Native graduates seeking to refinance student loans for reasons that were wholly unrelated to their personal merit of ability to repay their loans,” Clarke said.
Clarke said the case is an example of “historic inequities in lending and refinance opportunities” for minorities and why it’s important for the DOJ to continue opposing such transgressions.
The DOJ filed a complaint against SouthEast Bank Saturday in the U.S. District Court for Eastern Tennessee in Knoxville.
The complaint alleged SouthEast Bank officials from December 2015 to April 2021 automatically denied graduates of colleges and universities that had default rates above a predetermined threshold as determined by the bank.
The policy meant black college graduates were up to 4.3 times more likely to be declined refinancing compared to non-minority graduates, the DOJ said.
Indigenous students and Alaskan Natives were up to three times more likely to be denied compared to non-minority graduates.
The DOJ also accused SouthEast Bank officials of declining refinancing requests made by graduates of more than 84% of colleges and universities with majority-black student bodies, including historically black colleges and universities.
By comparison, refinancing requests were declined by graduates of 21% of colleges and universities whose respective student bodies were not majority-black, according to the DOJ.
The federal court must approve the settlement for it to take effect.
If approved, the settlement would compensate qualifying applicants who were denied refinancing and increase access to refinancing for qualified applicants who were graduated from colleges and universities whose alumni previously were excluded.
The settlement also would help pay for consumer financial education for students and graduates of those schools.
The DOJ initiated its investigation and court filing after receiving a referral from the Federal Deposit Insurance Corporation.
SouthEast Bank officials cooperated with the DOJ investigation into the matter and helped to resolve the allegations.
SouthEast Bank has 14 banking locations in eastern and central Tennessee and could not be reached for comment on Monday due to the Martin Luther King Jr. Day holiday.