DOJ resolves case against First Lowndes-update

Published 1:47 pm Monday, October 6, 2008

First Lowndes Bank has reached an agreement with the Department of Justice to pay up to $185,000 in compensation to African-American borrowers who government officials claim were charged higher interest rates on manufactured housing loans because of race.

First Lowndes Bank denied the government’s allegations in the consent order and there were no factual findings of discrimination.

The claim was resolved voluntarily by both parties to avoid “protracted and costly litigation,” according to the order.

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“The bank has been and is committed to treating all minority customers fairly, and I believe that the bank has done that consistently since 1984 when First Lowndes Bank opened,” said Jim Dunklin IV, CEO of First Lowndes.

For Dunklin, the settlement represents one last hurdle the bank had to face before moving forward. In March 2008, the FDIC filed a Cease and Desist Order against First Lowndes Bank for loan inconsistencies.

“When I joined First Lowndes Bank in February of this year, we immediately faced several issues with our regulators and this was the last one we had to address,” said Dunklin. “We are pleased with the successful resolution of the unintentional racial discrimination case arising from a small number of 2004-05 manufactured housing loans. Historically, First Lowndes Bank has worked hard to serve all residents in our market areas of Lowndes, Butler and Crenshaw and the surrounding counties. We look forward to continuing to provide excellent products and services to our costumers.”

In its complaint, the government said bank loan officers between the period of January 2005 and September 2005 did not use any formal guidelines to set interest rates on first-lien loans, but were instead allowed to set loan rates within “broad parameters.” Interest rates varied by as much as 1.5 percentage points between African-American borrowers and white borrowers, a significant difference that was not based on creditworthiness or loan amount, said the government.

The alleged violations were of the Fair Housing Act and Equal Credit Opportunity Act.

Additionally, the consent order requires First Lowndes Bank to implement procedures which prevent racial discrimination in setting interest rates, and the bank must provide extensive equal credit opportunity training for its loan officers who set interest rates for housing loans.

Dunklin said the bank has already contracted with an outside organization to provide the fair banking practice training required by the order. He also said the bank will monitor interest rate guidelines on a monthly basis to ensure compliance with the agreement.

“Under the new guidelines there is no subjectivity,” said Dunklin. “The guidelines are about as tight as you can get them.”

Dickson Farrior, who sits on the board at First Lowndes, believes last year’s problems will make the bank better.

“Our commitment is to our community,” said Farrior, speaking from the newly refurbished building that is now the Hayneville Branch of the First Lowndes Bank. “The bank is active with the Black Belt Community Foundation. We offer a community room for groups to meet. We’ve contributed to the Hayneville Library, 4-H projects and the brand new Fort Deposit Welcome Center. We are an important part of all the communities we serve.”

Barbara Evans contributed to this report.