Bank of America must pay 335 million dollars on racism charges

Dec 21, 2011, 23:22 GMT

Washington - The Bank of America will pay 335 million dollars to settle claims that its subsidiary Countrywide discriminated against minority borrowers from 2004 to 2008, the US Justice Department said Wednesday.

Countrywide, which was acquired by Bank of America in the depths of the recession in 2008, was charged with hiking interest rates and fees for more than 200,000 African-American and Hispanic borrowers who were qualified for lower prime rates.

The fees and interest rates were higher than those demanded of non-Hispanic white borrowers in both its retail and wholesale lending, the Justice Department said.

The practice pushed many qualified minority borrowers into the subprime category that carries a much higher likelihood of default and foreclosure.

The settlement was the 'largest residential fair lending settlement' in the history of the department of justice and served as a warning to other financial institutions, said Attorney General Eric Holder. It followed years of investigation.

'These institutions should make judgements based on applicant's creditworthiness, not on the colour of their skin,' Holder said.

The settlement money will be paid as compensation to the 200,000 borrowers.

Bank of America took over Countrywide in the midst of the financial crisis in 2008, a move that opened it to Countrywide's massive loans gone bad as the housing bubble burst. Bank of America must now bail out from the losses.