Business

Bank of America fined $335m for minority discrimination

BoA flag outside HQ
Image caption The case is the latest for Bank of America relating to the sub-prime mortgage crash

Bank of America's Countrywide Financial business has agreed to pay a record fine of $335m (£214m, 257m euros) to settle discrimination charges.

The US justice department said around 200,000 qualified African-American and Hispanic borrowers were charged with higher rates "solely because of their race or national origin".

Dan Frahm, a Bank of America spokesman, said in a statement that the bank did not practise lending based on race.

BoA bought Countrywide in 2008.

The settlement covers conduct between 2004 and 2008, before the BoA takeover.

'Discrimination with a smile'

Countrywide specialised in sub-prime mortgages, which were often granted without proper checks on criteria including the creditworthiness of borrowers.

The justice department said Countrywide had "steered" more than 10,000 minority borrowers into sub-prime mortgages, while white borrowers with similar credit profiles received prime loans.

Those sub-prime mortgage holders ended up paying more in fees and rates.

"These institutions should make judgements based on applicants' creditworthiness, not on the colour of their skin," Attorney General Eric Holder told reporters at a Wednesday press conference.

Borrowers in 41 states and the District of Columbia were affected by Countrywide's lending practices.

The justice department accused the company of abusing the trust of minority lenders, advertising that its offices had Spanish-speaking staff while charging Hispanic customers higher rates than they were qualified for.

"This is discrimination with a smile," said Thomas Perez, head of the department's civil rights division.

The civil rights division has about 20 open investigations in similar practices against minority home-buyers.

Dan Frahm, a Bank of America spokesman, said: "We discontinued Countrywide products and practices that were not in keeping with our commitment and will continue to resolve and put behind us the remaining Countrywide issues."

Subprime legacy

The fine is the latest problem for Bank of America (BoA) over sub-prime mortgages.

Earlier this year BoA paid $8.5bn from its Countrywide arm to settle claims it sold poor quality mortgage-backed bonds that lost money when the market crashed.

In another case, insurance group AIG also sued BoA for $10bn , accusing it of carrying out a "massive fraud" on bad mortgage debt.

AIG alleges that BoA exaggerated the quality of the $28bn worth of mortgage-backed investment products it bought from the bank prior to the 2008 turmoil in the financial markets.

BoA rejected those allegations.

Bad US mortgage debt that sparked the 2008 credit crunch and resulting turmoil in the global financial markets.

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