When the housing market collapsed, it did not take long for it to become public knowledge in Georgia and elsewhere that the lending practices of large banks were a significant factor. Lenders such as Bank of America, Wells Fargo and Citigroup Inc. were blamed. Now that the economy seems to be on the mend, a good deal of commercial litigation has been filed in an attempt to hold these banks accountable. Recently, a large west coast city filed a lawsuit against these three banks.
The lawsuit alleges that, beginning sometime in 2004, Bank of America engaged in discriminatory lending practices in certain minority neighborhoods. It is further alleged that these practices led to an inordinate number of foreclosures concentrated in certain areas of the city. The city claims that property values were distressed to a point where property tax revenues have been compromised. City services have been strained as well.
Los Angeles claims that Bank of America failed to offer minority borrowers the same terms as other borrowers. It is asserted that the banks offered minority borrowers terms considered predatory in other cases. Homeowners simply could not make their payments and ended up in foreclosure. The city filed comparable lawsuits against Wells Fargo and Citicorp Inc.
Commercial litigation against big banks such as Bank of America could continue for some time. The bank has chosen to settle a good deal of the claims against it so far, though it remains to be seen if it will do so in this case. Cities in Georgia and other states may keep a watchful eye on these lawsuits to determine whether similar claims would be feasible for them. Every business has the right to refute allegations against it in court. However, a determination as to whether the best interests of the company are served by going to court or if a settlement is a better option bears careful consideration.
Source: Reuters, LA sues Bank of America, alleges discriminatory mortgage lending, Brendan McDermid, Dec. 6, 2013