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By Matthew Russell Lee, Patreon Story
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SDNYCOURT / S Bronx, Sept 27 – Whether or not the U.S. Community Reinvestment Act will be again enforced under the new Administration and its regulators is an open question.

On the one hand we have this from September 27: United States has simultaneously filed and settled a civil fraud lawsuit against Wells Fargo Bank, N.A. (“Wells Fargo” or the “Bank”) alleging that it violated the Financial Institutions Reform Recovery and Enforcement Act (“FIRREA”) by fraudulently overcharging hundreds of commercial customers, many of them small and medium-sized businesses and federally-insured financial institutions, who used the Bank’s foreign exchange (“FX”) service.  Specifically, the United States alleged that, from 2010 through 2017, Wells Fargo FX sales specialists defrauded 771 customers by systematically charging them higher markups on FX transactions than they represented the Bank would charge, and concealing these overcharges through various misrepresentations and deceptive practices.     As part of the settlement, approved today by U.S. District Judge John G. Koeltl, Wells Fargo will pay a total of approximately $72.6 million, with approximately $35.3 million having been paid directly to the 771 customers collectively as restitution and approximately $37.3 million to be paid to the United States as civil penalties under FIRREA and as asset forfeiture.  Wells Fargo also made extensive admissions of certain conduct alleged in the Government’s complaint, including that many FX sales specialists overcharged hundreds of commercial customers by applying larger sales margins or spreads than they represented they would, and that, in certain instances, when customers contacted the Bank to inquire about higher-than-agreed-upon pricing, FX sales specialists would give customers false explanations for the inflated prices.

 On the other hand, on an actual CRA protest to a national bank with a disparate lending record, what?

We're referring to the proposed acquisition by South State of Atlantic Capital Bank. South State is so disparate that in South Carolina in 2020 for mortgage loans to African Americans it had more denials (147) than loans made (133) - while making six loans to whites for every denial to a white applicant.

On September 4, Fair Finance Watch commented to the Office of the Comptroller Currency, which some say has changed for the better. We'll see - on September 7, South State wrote to Fair Finance Watch, cc-ing the OCC and Fed: "Dear Mr. Lee... In the matter regarding the concerns of the Bank’s disparate marketing, the Bank is committed to providing equal access to credit throughout our footprint. The Bank takes a multi-layered approach to ensure that marketing of credit products reach all communities within the Bank’s Assessment Area and each application is underwritten without consideration of a prohibited basis. The Bank has undergone reviews by independent audit firms with reports dated June 30, 2020 and June 30, 2019 where marketing efforts have been reviewed. The reviews did not yield any fair lending concerns."

Then something is very wrong with those audits.

Inner City Press replied to South State Bank's Senior Vice President  and Deputy General Counsel V. Nicole Comer  and two others: "           Thanks for your response, which concludes "If you have further questions, please do not hesitate to contact me."     Given the disparities Fair Finance Watch has identified in South State's HMDA data, and your response, a few questions:  You wrote, "The Bank has undergone reviews by independent audit firms with reports dated June 30, 2020 and June 30, 2019 where marketing efforts have been reviewed. The reviews did not yield any fair lending concerns."  Question: Does this mean that the firmS used in 2019 and 2020 were different? Given the disparities, and the findings or yield, will you identify them?  Relatedly, you wrote: "the Bank annually engages an independent audit firm and conducts quarterly internal comparative file reviews.. Results of each of these comprehensive  evaluations and assessments indicated no evidence of disparate treatment or impact." Is this by the same firm or a different one? What is South State's explanation, then, of the disparities identified?  You wrote: "in 2021 the Bank created a new position, Director of Corporate Stewardship who is responsible for the social component of the Bank’s environmental, social, governance initiatives, which includes diversity, equity, and inclusion efforts." Has the position been filled? When?  Can you describe the work accomplished in each of the listed fields or efforts?"

They replied - but only the Fed has extended its comment period. So:

"there's response, while naming some names, did not substantive answer:  Thank you for allowing us the opportunity to provide additional information. Please accept this letter as a response to your follow up questions provided September 7, 2021. In October 2020, SouthState appointed LeDon Jones to serve as the Director of Corporate Stewardship, whose responsibilities include, among others, enterprise diversity, environmental and social governance, community development, and management development. Since his appointment, he has established SouthState’s Diversity and Inclusion (“D&I”) Council which is responsible for driving SouthState’s D&I strategic plan throughout the entire enterprise. The Council’s members include executive and senior managers from different business units across the organization. Through his leadership, Mr. Jones was instrumental in publishing SouthState’s inaugural Corporate Social Responsibility report, outlining the impact SouthState’s outreach efforts had on both the communities we serve and our employees in 2020. We invite you to review the report by visiting Corporate Social Responsibility (CSR) Report | SouthState Bank. In 2021, the Bank has further engaged and developed our relationships with Minority Owned Institutions via traditional forms of investment and creative engagements involving a $500,000 equity investment in Optus Bank and future plans of partnership. Because SouthState’s D&I initiatives include establishing programs that support personnel diversity to create an internal workforce that reflects the communities we serve, our Commercial Banking Internship and Management Training programs both fall under the Corporate Stewardship umbrella. The objective of these programs is to recruit talent from a diverse pool of students from local colleges and universities. In the 2021 internship class, 40% of the interns were gender or racially/ethnically diverse, 30% of the interns were women, and 30% of the interns were racial/ethnic minorities. With respect to the comparative file review and the independent audit firms, SouthState used different firms in 2019 and 2020. The use of two different firms was a result of consolidating third party service providers and modifying the scope of such audits following the merger of CenterState Bank, N.A. and South State Bank in June 2020. In each case, the scope of work included reviewing files to identify instances of disparate treatment between protected class and control group applicants. As stated in our initial response, after applying customary underwriting criterion and reviewing credit files, no evidence of disparate treatment was identified. We trust these responses resolve your additional questions."  No, they did not respond.

 And the Fed's AI letter entirely missed it.

 Inner City Press on the FOIA (and Fair Finance Watch, on the HMDA) will have more to say about this. Watch this site.

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