Westerly-based Washington Trust, the nation’s oldest community bank, has agreed to pay $9 million to resolve allegations that it discriminated for years against borrowers in majority Black and Latino neighborhoods in Rhode Island, federal prosecutors announced Tuesday.
“Our investigation found that the bank engaged in redlining, through discriminatory lending practices,” U.S. Attorney Zachary Cunha said during a news conference at his office in downtown Providence.
Prosecutors said that as Washington Trust expanded and became a statewide bank by 2016, it never opened a branch in a majority Black or Latino neighborhood. As a result, they said, the bank received one-quarter as many home loan applications as other banks from people of color.
The subsequent loans by other banks to Black and Latino borrowers shows that they were credit-worthy, Cunha said.
As a result of the agreement, subject to approval by a federal judge, Washington Trust will fund a $7 million program to help borrowers of color to access credit, something expected to yield $70 million in lending.
The bank has agreed to open two branches in communities of color, with one expected for the Olneyville section of Providence. The remaining $2 million paid by the bank will promote outreach and consumer financial education and foreclosure prevention.
Cunha commended Washington Trust for cooperating with the investigation, although he said it was also aware of its discriminatory lending for years.
“As early as 2011, we allege that the bank was aware of its redlining risk from both internal and external assessments, including from its own compliance department,” he said. “But even with that information, we allege that no effective changes were made and that Washington Trust did not take adequate steps to remedy the situation and meet its legal obligations.
The investigation into Washington Trust grew out of a review of data by the Justice Department, Cunha said.
“This investigation highlights an issue that has plagued our communities for too long,” Harrison Tuttle, president of the BLM RI PAC, said in a separate statement. “Lending discrimination perpetuates economic disparities and reinforces systemic racism that disproportionately affects Black and minority communities. Access to fair and equitable lending is a right that should be enjoyed by every resident of Rhode Island, regardless of their racial or ethnic background.”
Asked where responsibility for the problems should be placed in the bank’s organizational structure, Cunha said, “Well, I think I’d say it’s a pervasive issue throughout the organization and we place blame throughout the organization, and the organization as a whole is being held accountable. I don’t think there’s any particular individual who we’ve singled out as responsible for this conduct.”
Washington Trust, through a Washington, D.C.-based lawyer with the firm Goodwin Procter LLP, signed off on the terms of the consent agreement.
In a statement on its website, Washington Trust said, “Washington Trust vehemently denies the allegations and entered into this agreement solely to avoid the expense and distraction of potential ligation, and to allow the Bank to focus fully on serving the needs of its customers and communities.”
Kristen Clark, assistant U.S. Attorney General for the civil right division, joined the announcement remotely. She said the announcement sends a message to the financial industry “that we will not stand for discriminatory and unlawful barriers to residential mortgage lending.”
Clark said redlining harms communities of color by denying them equal access to credit and the opportunity to build wealth. “Over the past 10 years, on average, a white family was 70% more likely to own a home than a Black family,” she said, “and the median wealth of a Black family is $24,000, compared to $188,000 for a white family.”
Clark said a recent study showed that while 62% of Rhode Islanders own their homes, only 30% of Black residents own their homes.
While Providence is among the many cities where redlining took place for years, the practice is widely considered a bygone issue.
Clark, however, said a Justice Department initiative to reduce redlining was launched in 2021, and that 8 agreements since then have brought in close to $100 million in LA, Houston, Memphis, Philly, Newark and Columbus, Ohio.
Washington Trust is the largest state-chartered bank based in Rhode Island.
Disclosure: Washington Trust is a business underwriter of The Public’s Radio.
This story has been updated.
Ian Donnis can be reached at idonnis@thepublicsradio.org
