United States of America and Consumer Financial Protection Bureau v. BancorpSouth Bank

Documents in this case

• Consent order · 4 p.
• Consent order · June 2016 · 39 p.
• Complaint · June 2016 · 38 p.
• Document · June 2016 · 5 p.

Case summary

On April 23, 2025, the President issued Executive Order 14281 on “Restoring Equality of Opportunity and Meritocracy,” which provides that “[i]t is the policy of the United States to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible.” On April 22, 2026, the Bureau issued final amendments to the Equal Credit Opportunity Act’s (ECOA) implementing regulation, Regulation B, which state that ECOA does not authorize disparate-impact liability.

The CFPB and the Department of Justice (DOJ) announced a joint action against BancorpSouth Bank for discriminatory mortgage lending practices that harmed African Americans and other minorities.  The complaint filed by the CFPB and DOJ alleges that BancorpSouth engaged in numerous discriminatory practices, including illegally redlining in Memphis; denying certain African Americans mortgage loans more often than similarly situated non-Hispanic white applicants; charging African-American customers for certain mortgage loans more than non-Hispanic white borrowers with similar loan qualifications; and implementing an explicitly discriminatory loan denial policy. Under the terms of the consent order, BancorpSouth will pay $4 million in direct loan subsidies in minority neighborhoods in Memphis, at least $800,000 for community programs, advertising, outreach, and credit repair, $2.78 million to African-American consumers who were unlawfully denied or overcharged for loans, and a $3 million penalty.

Consent order

PDF of this document (4 pages)

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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF MISSISSIPPI ABERDEEN DIVISION UNITED STATES OF AMERICA, and CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiffs, v.

BANCORPSOUTH BANK, Defendant.

Case No. 1:16-cv-00118-MPM-DAS

ORDER TERMINATING CONSENT ORDER The parties have submitted a joint motion to terminate the Consent Order in this matter pursuant to paragraph 85 of that Order. Paragraph 85 states in relevant part: At any time after the Order has been in effect for three years, the parties may file a joint motion to terminate this Order, which motion may be proposed by Defendant if Defendant has fully complied with all its terms, including, but not limited to, the disbursement of all funds in the Loan Subsidy Program, and accomplished the remedial goals of the Order, as determined by Plaintiffs.

WHEREAS the effective date of the Consent Order was July 25, 2016. Thus, the Consent Order had been in effect for three years as of July 25, 2019. Absent a joint motion, the Consent Order is expected to expire upon Plaintiffs’ non-objection to the Defendant’s fourth Annual Report pursuant to paragraph 77 of the Consent Order, which is due on or about September 7, 2020.

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IT IS ORDERED that the parties’ motion is granted, the Consent Order shall terminate as of the date of entry of this Order, and this case is dismissed with prejudice. SO ORDERED, this 27th day of January, 2020.

/s/ Michael P. Mills___________ ___

UNITED STATES DISTRICT JUDGE

NORTHERN DISTRICT OF MISSISSIPPI

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The undersigned hereby consent to the entry of this Order:

For the Plaintiffs:

United States of America

SAMEENA SHINA MAJEED Chief

JON M. SEWARD Deputy Chief

/s/ Patricia L. O’Beirne

PATRICIA L. O’BEIRNE (DC Bar #437018) Trial Attorney Patricia.O’[email protected]

/s/ Oneshia S. Herring

ONESHIA S. HERRING (NC Bar #41308) Trial Attorney [email protected]

United States Department of Justice Civil Rights Division Housing and Civil Enforcement Section 4 Constitution Square 150 M Street NE – 8th Floor Washington, DC 20530 Phone: (202) 514-4713 Fax: (202) 514-1116

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Consumer Financial Protection Bureau:

Cara Petersen Acting Enforcement Director

Deborah Morris Deputy Enforcement Director

Michael Favretto Acting Assistant Deputy Enforcement Director

/s/ Jesse Stewart

Jesse Stewart (NY Bar No. 5145495) Enforcement Attorney Email: [email protected] Tel.: 202-435-9641 Fax: 202-435-5471 1700 G Street, NW Washington, DC 20552

For the Defendant BancorpSouth Bank:

Anand S. Raman (admitted pro hac vice) Skadden, Arps, Slate, Meagher & Flom LLP 1440 New York Avenue, N.W. Washington, D.C. 20005-2111 Tel. 202-371-7000 Fax 202-393-5760 [email protected]

/s/ Heath A. Fite

Heath A. Fite (MS#100889) Waller Lansden Dortch & Davis, LLP Regions-Harbert Plaza, Suite 1400 1901 6th Avenue North Birmingham, AL 35203 Phone: 205-214-6380 Fax: 205-214-8787 [email protected] Case: 1:16-cv-00118-MPM-DAS Doc #: 17 Filed: 01/27/20 4 of 4 PageID #: 132

Consent order (June 2016)

PDF of this document (39 pages)

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IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF MISSISSIPPI ABERDEEN DIVISION UNITED STATES OF AMERICA, and CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiffs, v.

BANCORPSOUTH BANK, Defendant.

Case No. 1:16cv118

CONSENT ORDER

I. INTRODUCTION

The parties jointly submit this Consent Order (“Order”) for the approval of and entry by the Court. The Order resolves all claims of the United States and Consumer Financial Protection Bureau (“Bureau”) (collectively, “Plaintiffs”) simultaneously filed in a Complaint (ECF No. 1) alleging that BancorpSouth Bank violated the Equal Credit Opportunity Act (“ECOA”), 15 U.S.C. §§ 1691-1691f, and the Fair Housing Act (“FHA”), 42 U.S.C. §§ 3601-3619, by, among other things: (1) unlawfully redlining majority-minority neighborhoods in the Memphis Metropolitan Statistical Area (“MSA”), as defined below; (2) illegally discriminating against African-American applicants in the underwriting of certain mortgage loans; and (3) illegally discriminating against African-American borrowers in the pricing of certain mortgage loans. This Court has jurisdiction over the parties and the subject matter of this action. There has been no factual finding or adjudication with respect to any matter alleged by Plaintiffs. Defendant neither admits nor denies any allegations in Plaintiffs’ Complaint. The parties agree Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 1 of 39 PageID #: 57

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that full implementation of the terms of this Order will resolve the allegations in Plaintiffs’ Complaint.

II. BACKGROUND

Defendant BancorpSouth Bank (the “Bank” or “BancorpSouth”) is a regional depository institution headquartered in Tupelo, Mississippi. The Bank operates branches in eight states: Alabama, Arkansas, Florida, Louisiana, Mississippi, Missouri, Tennessee, and Texas. As of March 31, 2016, the Bank had total assets of $13.9 billion. BancorpSouth Bank is a whollyowned subsidiary of BancorpSouth, Inc., a financial holding company. Plaintiffs conducted a joint investigation of BancorpSouth Bank’s lending practices and concluded that, beginning at least on January 1, 2011, Defendant violated the ECOA and the FHA by, among other things: (1) redlining majority-minority neighborhoods in the Memphis MSA; (2) illegally discriminating against African-American applicants in the underwriting of certain mortgage loans; and (3) illegally discriminating against African-American borrowers in the pricing of certain mortgage loans.

The Complaint alleges, among other things, that Defendant’s policies and practices denied an equal opportunity to and discouraged the residents of majority-minority neighborhoods in the Memphis MSA from seeking mortgage loans on account of the racial composition of those neighborhoods; discriminated against African-American applicants by denying their mortgage loan applications more often than similarly situated non-Hispanic White (“White”) applicants; and discriminated against African-American applicants by charging them higher prices on their mortgage loans than similarly situated White applicants. In the provisions of this Order, Defendant has committed to remedying the practices alleged in the Complaint by ensuring that the credit needs of residents located in majority-minority neighborhoods are fairly met in the Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 2 of 39 PageID #: 58

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future, aiding in the revitalization and stabilization of the housing market in majority-minority neighborhoods, providing redress to alleged victims of underwriting and pricing discrimination, and ensuring that African-American applicants are treated fairly in the underwriting and pricing of mortgage loans going forward.

III. POSITION OF BANCORPSOUTH

Defendant has recently taken a number of steps to improve its compliance management system, reduce its fair lending risk, and increase its lending in minority areas. These steps include: (1) implementing rate sheets to price loans originated by its Community Banking Department1; (2) transitioning to centralized underwriting in its Community Banking Department; (3) appointing a Chief Fair Lending Officer with responsibility over the Bank’s fair lending compliance program; (4) appointing a Community Development Lending Manager with responsibility over meeting the needs of homebuyers in low-to-moderate income and minority communities, and hiring 16 community development mortgage specialists; (5) opening a fullservice branch in a majority-minority neighborhood in the Memphis MSA; (6) providing financial literacy training in the Memphis MSA; (7) implementing enhanced fair lending training; (8) introducing a low down-payment credit product; (9) monitoring pricing and underwriting outcomes on a quarterly basis; and (10) hiring a new Chief Executive Officer, President, General Counsel, Mortgage Department President, and Chief Banking Officer and Director of Community Lending.

1 As used in this Order, the term “Department” encompasses units that the Bank previously referred to as “Divisions.”

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The Bank enters into this settlement solely for the purpose of avoiding contested litigation with the United States and the Bureau, and to instead devote its resources to assisting eligible borrowers with meeting their credit needs. IV. DEFINITIONS

1.

The following definitions apply to this Order: a.

“Affected Consumers” means all alleged victims of underwriting and/or pricing discrimination that occurred between January 1, 2011 and December 31, 2015, who Plaintiffs determine may be entitled to monetary relief from the Settlement Fund to remedy Defendant’s alleged underwriting and/or pricing discrimination. b.

“Covered Employees” means all of Defendant’s employees who participate in Defendant’s Mortgage Lending; marketing; or opening, relocating, or closing branches or loan production offices, as well as any manager or senior manager over such employees.

c.

“Defendant” means BancorpSouth Bank and its successors and assigns. d.

“Denied Applicants” means African-American applicants (and any coapplicants) whose Mortgage Loan applications to Defendant’s Community Banking Department were denied between January 1, 2011 and December 31, 2015. e.

“Effective Date” is the date on which the Court enters this Order. f.

“High-minority neighborhood” means a census tract with a minority population of 80 percent or greater based on 2010 U.S. census data. g.

“Majority-minority neighborhood” means a census tract with a minority population of 50 percent or greater based on 2010 U.S. census data. Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 4 of 39 PageID #: 60

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h.

“Memphis MSA” means the Memphis, TN-MS-AR Metropolitan Statistical Area.

i.

“Mortgage Loans” means all loans that Defendant is required to report under the Home Mortgage Disclosure Act, 12 U.S.C. §§ 2801-2810. j.

“Mortgage Lending” means the provision of Mortgage Loans. k.

“Non-objection” means written notification to Defendant that there is no objection to a proposal by Defendant for a course of action.2 Plaintiffs will endeavor to direct revisions or provide a Non-objection within 30 days of the submission of a proposal by Defendant. In the event of an objection to a proposal, Defendant will make all revisions directed by Plaintiffs and resubmit the proposal for Non-objection within 14 days. Unless otherwise specified below, Defendant will begin implementation of the course of action and follow any steps, recommendations, deadlines, and timeframes within 14 days of notification to Defendant of Non-objection. Any material changes to any course of action that is subject to non-objection cannot be made without Defendant obtaining written notification that there is not an objection to Defendant’s proposed change.

l.

“Qualified Applicant” means any applicant for a Mortgage Loan who is qualified for a Mortgage Loan under Defendant’s underwriting standards, and who applies for a Mortgage Loan for a property located in a majority-minority neighborhood in the Memphis MSA that will serve as the borrower’s principal dwelling.

Actions taken by the Bureau under this Order, including but not limited to Non-Objections, will be carried out by the Bureau’s Fair Lending Director, or his/her delegate. Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 5 of 39 PageID #: 61

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m.

“Related Action” means a private action by or on behalf of one or more plaintiffs or an enforcement action by another governmental agency brought against Defendant based on substantially the same facts alleged in the Plaintiffs’ Complaint. V. TERMS OF ORDER

A.

Nondiscrimination Injunction 2.

Defendant, including its officers, employees, agents, representatives, assignees, and successors in interest, and all those in active concert or participation with any of them, is hereby enjoined from engaging in any act or practice that discriminates in any aspect of a residential real estate-related transaction, in violation of the Fair Housing Act, 42 U.S.C. §§ 3604 and 3605, or in any aspect of a credit transaction, in violation of the Equal Credit Opportunity Act, 15 U.S.C. § 1691(a)(1).

B.

Fair Lending Compliance Management System (“CMS”) CMS Consultant 3.

Within 30 days of the Effective Date, Defendant must identify an independent third-party compliance-management-system consultant to assist in the review and revision as necessary of Defendant’s fair lending compliance management system relating to Mortgage Lending (“CMS Consultant”).3 Defendant’s selection of the CMS Consultant will be subject to Plaintiffs’ Non-objection. Within 20 days of Non-objection to the selection of the CMS

3 All material required by this Order to be sent to Plaintiffs must be sent by commercial overnight delivery service addressed as follows: Fair Lending Director, c/o Jeffrey Blumberg, Consumer Financial Protection Bureau, 1700 G Street, NW, Washington, DC 20552; and Sameena Shina Majeed, Chief, Housing and Civil Enforcement Section, Civil Rights Division, U.S. Department of Justice, 1800 G Street, NW, Suite 7200, Washington, DC 20006, Attn. DJ #188-40-7. The parties may also agree to delivery either electronically or by hand-delivery to the above addresses by courier.

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Consultant, Defendant must enter into a contract with the CMS Consultant, subject to Plaintiffs’ Non-objection, requiring the CMS Consultant to conduct a detailed assessment of Defendant’s fair lending compliance management system relating to Mortgage Lending. The assessment required by this Paragraph must include, at a minimum, a review of: whether any Mortgage Lending-related policies or procedures consider a prohibited basis under the ECOA or FHA; the underwriting and pricing policies and practices of Defendant’s Community Banking Department relating to Mortgage Lending; Defendant’s policies and practices governing the provision of information to prospective applicants for mortgages; practices that may pose mortgage redlining risk in the Memphis MSA; and the diversity policies and practices of Defendant in the Memphis MSA.

4.

Within 75 days of notification of Plaintiffs’ Non-objection to Defendant’s contract with the CMS Consultant, Defendant must submit to Plaintiffs a detailed written report by the CMS Consultant describing Defendant’s fair lending compliance management system, weaknesses in the system, and recommendations to strengthen it to ensure that Defendant does not engage in discrimination in violation of the ECOA or the FHA. CMS Plan 5.

Within 45 days of Defendant’s submission of the CMS Consultant’s written report pursuant to Paragraph 4, Defendant must submit a written compliance plan (“CMS Plan”) to Plaintiffs, subject to Non-objection by Plaintiffs, the purpose of which is to ensure that Defendant does not engage in discrimination in violation of the ECOA or the FHA in connection with its Mortgage Lending. The CMS Plan must include, at a minimum, the following components, as necessary informed by findings by the CMS Consultant: Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 7 of 39 PageID #: 63

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a.

steps to effectively and promptly review and revise Defendant’s current Mortgage Lending policies and practices to ensure compliance with the ECOA and the FHA;

b.

adoption or revision of diversity policies and practices; c.

implementation or revision of fair lending training as set forth in Paragraph 7;

d.

adoption or revision of written policies and procedures regarding the provision of information and assistance to individuals who apply for mortgage credit or inquire about the possibility of applying for mortgage credit. A primary purpose of these policies and procedures will be to ensure that Defendant provides equal information and assistance regardless of race or other prohibited characteristics; e.

adoption or revision of a formal process for ongoing monitoring of Defendant’s Mortgage Lending for compliance with the ECOA and the FHA and for taking appropriate corrective action when necessary, including but not limited to the statistical analyses described in Paragraphs 14 and 19; f.

implementation or revision of regular audits of Defendant’s Mortgage Lending, to occur at least annually, internally by Defendant’s audit department or by an independent party, to assess compliance with the ECOA and the FHA. Defendant must provide the written findings of these audits to Plaintiffs as part of the Annual Reports referenced in Paragraph 77; and g.

implementation or revision of a consumer complaint resolution program to address consumer complaints alleging discrimination in Mortgage Lending. Defendant must provide to Plaintiffs documentation from this complaint resolution program, Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 8 of 39 PageID #: 64

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including documentation of any individual complaints alleging discrimination and any resolution, as part of the Annual Reports referenced in Paragraph 77.

Training

6.

Within 21 days of the Effective Date, Defendant will provide to all Covered Employees and members of its Board of Directors (“Board”) an explanation and copies of this Order and the Complaint in this matter, and allow an opportunity for such employees and members to have any questions concerning this Order and the Complaint answered. 7.

Defendant has provided fair lending training on an annual basis to all lending personnel, including senior management. Defendant will hire an independent, qualified third party to provide the fair lending training that is required by this Paragraph to all Covered Employees to ensure that their activities are conducted in a nondiscriminatory manner. This training will address at a minimum Defendant’s obligations under the ECOA and FHA, the subject of implicit racial bias, and Defendant’s responsibilities under this Order. In addition to receiving the training for Covered Employees described in this Paragraph, Defendant’s senior management, as defined from time to time by Defendant’s Board, and Defendant’s Board will receive specialized training targeted to their oversight function on conduct that could constitute redlining, underwriting discrimination, or pricing discrimination, and how to detect, prevent, and remedy such discrimination. During the training, the Defendant will provide to each participant a copy of this Order. The training must require participants to verify participation and demonstrate proficiency. The training may be provided either electronically or in-person. 8.

Defendant shall submit the proposed independent qualified third party and proposed training curriculum to Plaintiffs within 30 days after the Effective Date, and Defendant shall provide the training within 30 days following Non-objection by Plaintiffs. 9.

Defendant will bear all costs associated with the training(s). Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 9 of 39 PageID #: 65

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10.

Defendant will secure from each individual required to have training pursuant to Paragraph 7 a signed statement acknowledging that s/he has received a copy of this Order and the Complaint and has completed the fair lending training(s). These statements will be substantially in the form of Appendix A (Acknowledgment) and Appendix B (Fair Lending Training). The signatures required by Paragraphs 7 and 10 may be made electronically. 11.

Defendant will also provide each new Covered Employee or Board member a copy of this Order and the Complaint, provide an opportunity to have any questions answered, and secure an acknowledgement no later than 30 business days after beginning in his or her employment in that position. Defendant will further provide each such individual with the training referenced in Paragraph 7 and secure an acknowledgment within 60 days of the date the individual begins his or her employment in that position. C.

Pricing and Underwriting Compliance Plan 12.

Within 60 days of the Effective Date, Defendant must submit to Plaintiffs for Non-objection a plan setting forth the actions Defendant has already taken and plans to take to comply with Paragraphs 13 – 42 H.42of this Order (“Pricing and Underwriting Compliance Plan”). The Pricing and Underwriting Compliance Plan must include, at a minimum: a.

The Community Banking Department pricing and underwriting policies and procedures and monitoring programs required by Paragraphs 13, 17 and 18; b.

Proposed methodologies for the semi-annual analyses required by Paragraphs 14 and 19;

c.

Proposed plans for remuneration of affected consumers and additional corrective action if statistically significant disparities are found, as required by Paragraphs 15 and 20; and Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 10 of 39 PageID #: 66

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d.

A proposed plan for offering credit to denied African-American applicants, as required by Paragraphs 37 and 39.

D.

Pricing Policies and Monitoring 13.

Defendant will implement policies and procedures for the pricing of all Mortgage Loans to natural persons originated by its Community Banking Department. Defendant will utilize rate sheets to price all Mortgage Loans to natural persons originated by its Community Banking Department that exclusively base pricing on objective credit and borrower characteristics supported by a legitimate business need. Defendant must maintain a policy that describes its use of rate sheets. The policy must contain requirements to retain a copy of the rate sheet in effect at the time the Mortgage Loan price was set and a list of the borrower and loan characteristics relied on in setting the loan price. To the extent Defendant makes exceptions to these rate sheets, Defendant must maintain policies and procedures that: (1) specifically define the circumstances when Defendant allows exceptions; (2) require documentation appropriate for each exception that is sufficient to effectively monitor compliance with the exception policies and procedures, including providing the basis for granting the exception and details and/or documentation of the particular circumstances supporting the use of the exception; and (3) require document retention that, at a minimum, complies with the requirements of Regulation B, 12 C.F.R. pt. 1002. Defendant will submit the policies and procedures described in this Paragraph to Plaintiffs for Non-objection. In the event Defendant seeks to alter the policies and procedures required by this Paragraph during the term of the Order, it must submit the proposed changes to Plaintiffs for Non-objection.

14.

Defendant conducts periodic fair lending statistical analyses of loan pricing. Defendant must conduct semi-annual portfolio-wide statistical analysis of the note rates of Mortgage Loans to natural persons originated by its Community Banking Department for Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 11 of 39 PageID #: 67

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disparities based on, at a minimum, race. The controls in this regression analysis will be limited to the factors considered in pricing loans set forth in Defendant’s rate sheets, unless Plaintiffs Non-object to the use of additional controls. Defendant will complete the first semi-annual analysis by August 15, 2017. The first semi-annual analysis will analyze all Mortgage Loans to natural persons originated by the Community Banking Department since implementation of the pricing policies and procedures set forth in Paragraph 13 through June 30, 2017, and each subsequent semi-annual analysis will review data for every six-month period thereafter. The methodology for this statistical analysis shall be provided to Plaintiffs no later than 60 days after the Effective Date and will be subject to Non-objection by Plaintiffs. 15.

If any statistical analysis required by Paragraph 14 discloses statistically significant disparities in the pricing of Mortgage Loans from natural persons in its Community Banking Department on the basis of race, Defendant will within 45 days of the analysis: (a) remunerate affected consumers using a method subject to Plaintiffs’ Non-objection; and (b) take additional corrective action, such as proposing steps to modify its pricing policies and procedures as necessary to prevent such disparities going forward, subject to Non-objection by Plaintiffs, and education, discipline, or termination of employee(s), as deemed appropriate. 16.

Within 90 days of the end of each six-month period, Defendant must provide to Plaintiffs the results of the most recent semi-annual analysis, the data used in the analysis, and documentation of any corrective action taken.

E.

Underwriting Policies and Monitoring 17.

Subject to Plaintiffs’ Non-objection, Defendant must maintain specific raceneutral underwriting guidelines, policies, and procedures for Mortgage Loans to natural persons originated by its Community Banking Department that are designed to ensure consistent application of legitimate underwriting criteria and avoid unlawful discrimination. To the extent Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 12 of 39 PageID #: 68

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Defendant makes exceptions to these guidelines, Defendant must maintain policies and procedures that: (1) specifically define the circumstances when Defendant allows exceptions; (2) require documentation appropriate for each exception that is sufficient to effectively monitor compliance with the exceptions policies, including providing the basis for granting the exception and details and/or documentation of the particular circumstances supporting the use of the exception; and (3) require document retention that, at a minimum, complies with the requirements of Regulation B, 12 C.F.R. pt. 1002.

18.

Defendant has implemented a program of controls and monitoring for compliance with its Community Banking Department underwriting policies and procedures, including but not limited to its current practice of second reviews of all Mortgage Loan application denials. The program shall be modified as necessary to ensure that any loan that satisfies the Bank’s underwriting criteria and is otherwise in compliance with the Bank’s underwriting policies and procedures will be funded, and that any loan that is not in compliance with the policies and procedures will not be funded. This program of controls and monitoring shall be subject to Plaintiffs’ Non-objection.

19.

Defendant conducts periodic fair lending statistical analyses of underwriting outcomes. Defendant must conduct a semi-annual analysis of the underwriting of Mortgage Loan applications from natural persons in its Community Banking Department for disparities based on, at a minimum, race. The controls in this regression analysis will be limited to the legitimate and consistently applied underwriting criteria described in Defendant’s underwriting guidelines, unless Plaintiffs Non-object to the use of additional controls. Defendant will complete the first semi-annual analysis by August 15, 2017. The first semi-annual analysis will analyze all Mortgage Loan applications from natural persons in its Community Banking Department since Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 13 of 39 PageID #: 69

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implementation of the underwriting policies and procedures set forth in Paragraph 17 through June 30, 2017, and each subsequent semi-annual analysis will review data for every six-month period thereafter. The methodology for this semi-annual analysis shall be provided to Plaintiffs no later than 60 days after the Effective Date and will be subject to Non-objection by Plaintiffs. 20.

If any analysis required by Paragraph 19 discloses statistically significant disparities in the underwriting of Mortgage Loan applications to natural persons in the Community Banking Department based on race, Defendant must within 45 days of the analysis: (a) remunerate affected consumers using a method subject to Plaintiffs’ Non-objection; and (b) take additional corrective action, such as proposing steps to modify its underwriting policies and procedures as necessary to prevent such disparities going forward, subject to Non-objection by Plaintiffs, and education, discipline, or termination of employee(s), as deemed appropriate. 21.

Within 90 days of the end of each six-month period, Defendant must provide to Plaintiffs the results of the most recent statistical analysis, the data used in the analysis, and documentation of any corrective action taken.

F.

Settlement Administrator 22.

Within 30 days of the Effective Date, Defendant must propose a Settlement Administrator (“Administrator”) to Plaintiffs. The selection of the Administrator will be subject to Plaintiffs’ Non-objection. Within 30 days of Plaintiffs’ Non-objection, Defendant must execute a contract with the Administrator to conduct the activities set forth in the following paragraphs. The terms of the Administrator’s contract, statement of work, and/or business rules or similar documents related to the Administrator’s duties pursuant to this Order will be subject to Plaintiffs’ Non-objection. Defendant must bear all costs and expenses of the Administrator. The Administrator’s contract must require the Administrator to comply with the provisions of this Order as applicable to it and must require it to work cooperatively with Plaintiffs in the Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 14 of 39 PageID #: 70

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conduct of its activities, including reporting regularly to and providing all reasonably requested information to Plaintiffs. The contract must further require the Administrator to comply with all confidentiality and privacy restrictions applicable to the party who supplies information and data to it.

23.

In the event Plaintiffs have reason to believe that the Administrator is not materially complying with the terms of its contract with Defendant, the parties must meet and confer for the purpose of mutually agreeing upon a course of action to effect the Administrator’s material compliance with its contract or to replace the Administrator. In the event that the parties are unable to reach agreement, any party may present the matter to this Court for resolution. 24.

Defendant must allow the Administrator access to relevant Mortgage Loan files, borrower information, and any other information necessary for the purpose of accomplishing its duties under this Order.

25.

The Administrator’s contract must require the Administrator, as part of its operations, to establish cost-free means for individuals eligible for relief pursuant to this Order to contact it, including an email address, a website, a toll-free telephone number, and means for persons with disabilities to communicate effectively, including TTY. G.

Settlement Fund 26.

Defendant must deposit in an interest-bearing escrow account $2,776,890 for the purpose of providing redress to Affected Consumers for harm they may have suffered as a result of Defendant’s alleged pricing and underwriting discrimination (“Settlement Fund”). Title to this account must be in the name of “BancorpSouth Bank for the benefit of Affected Consumers pursuant to Order of the Court in Civil Action No. ______.” Defendant must provide to Plaintiffs written verification of the deposit within five days of the Effective Date. Any interest that accrues will become part of the Settlement Fund and must be utilized and disposed of as set forth Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 15 of 39 PageID #: 71

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herein. Any taxes, fees or other costs incurred by the Settlement Fund must be paid by Defendant.

27.

Plaintiffs will request from Defendant information and data Plaintiffs reasonably believe will assist in identifying Denied Applicants and Affected Consumers to be contacted by the Administrator (“Identified Consumers”) and determining any monetary and other damages, including but not limited to a database of all Mortgage Loan applications received by Defendant’s Community Banking Department from January 1, 2011 through December 31, 2015; the name; Social Security number or Tax Identification Number; property address; and mailing address for the primary applicant and each co-applicant(s) (if any) for each listed loan application. This information and data will be used by Plaintiffs only for the purposes of enforcing and implementing this Order. Within 30 days of the request, Defendant will supply the requested information and data that is within its control. 28.

Plaintiffs and the Administrator may request from Defendant any additional information they reasonably believe will assist them in identifying Affected Consumers. Within 15 days of any such request, Defendant must provide to Plaintiffs and the Administrator all requested information that is within its control, and for information not within its control, identify other parties that may have the information. Upon reasonable notice, Defendant must allow Plaintiffs access to Defendant’s records and files to verify the accuracy of the information provided or to otherwise identify Affected Consumers.

29.

After receipt of all the information required to be provided by Paragraph 27, Plaintiffs will provide the Administrator with the initial estimate of the amount each Identified Consumer will receive from the Settlement Fund (“Initial Payment List”). The total amount of the Settlement Fund shall not be altered based on the number of Identified Consumers or the Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 16 of 39 PageID #: 72

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initial estimates of the amounts they will receive. No individual may request a review by the Court, the Administrator, or any party of the payment amounts. 30.

The contract with the Administrator must require the Administrator to adopt effective methods, as requested by Plaintiffs, to identify up-to-date addresses and other contact information; to locate each Identified Consumer; obtain such information as Plaintiffs reasonably consider necessary to confirm their identities and eligibility; and to provide to Plaintiffs a list of Identified Consumers whose identities and eligibility have been confirmed (“Confirmed Consumers”) within six months from the date Plaintiffs provide the Initial Payment List. 31.

After the Administrator provides to Plaintiffs a list of Confirmed Consumers, Plaintiffs will provide to the Administrator a list with the final amount each Confirmed Consumer will receive from the Settlement Fund (“Final Payment List”). Within 30 days after its receipt of the Final Payment List from Plaintiffs, the Administrator shall deliver payments to Confirmed Consumers in the amounts on the Final Payment List. 32.

The Administrator’s contract must also require it to distribute funds from the Settlement Fund to Confirmed Consumers that may not be on the Final Payment List, as directed by Plaintiffs. The total amount paid to Confirmed Consumers will not exceed the total amount of the Settlement Fund, including accrued interest. The total amount of the Settlement Fund will not be altered based on the number of Confirmed Consumers or the amounts they receive. No individual, agency, or entity may request that any court, the Administrator, Plaintiffs, or Defendant review final payment amounts.

33.

Payment of redress to any individual under this Order may not be conditioned on that person waiving any right. Defendant will not be entitled to a set-off, or any other reduction, of the amount of payments to Confirmed Consumers because of any debts owed by the Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 17 of 39 PageID #: 73

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Confirmed Consumers. Defendant also will not refuse to make a payment based on a release of legal claims or account modification previously signed by any Confirmed Consumers. 34.

The Administrator’s responsibility to make payments to Confirmed Consumers may be discharged on a rolling basis with approval from Plaintiffs. Any checks that are returned with a forwarding address shall promptly be re-sent to that new forwarding address. The Administrator’s contract shall also require it to further conduct a reasonable search and attempt to redeliver any payment that is returned to the Administrator as undeliverable, or not deposited, within 60 days. The contract with the Administrator must require the Administrator to adopt effective methods, as requested by Plaintiffs, to maximize the number of Confirmed Consumers who cash or negotiate their checks.

35.

Once Plaintiffs determine that distributing any remaining money in the Settlement Fund to Confirmed Consumers, including accrued interest, is impracticable, the Administrator must distribute those funds, following the process described below, to organization(s) that provide services including credit and housing counseling (including assistance in obtaining loan modification and preventing foreclosure); legal representation of borrowers seeking to obtain a loan modification or to prevent foreclosure; and financial literacy, and other related educational programs targeted at African-American individuals in communities where Defendant operates (“Qualified Organization”). Recipient(s) of such funds must not be related to Defendant or any entity owned by Defendant. Before making a final selection of the Qualified Organization(s), Defendant must obtain a proposal from each organization on how it will use the funds consistent with the above-stated purposes and submit such proposal(s) to the United States. Within 30 days after the Payment Expiration Date, Defendant will submit the proposals from the Qualified Organizations, and the proposed amount of funds each Organization would receive, to the United Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 18 of 39 PageID #: 74

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States. Defendant shall consult with and obtain the Non-objection of the United States to the proposals. Within 30 days of Non-objection by the United States to the proposals, the Defendant and the United States shall seek the Court’s approval of the selection of the Qualified Organizations and the amount to be distributed to each Qualified Organization prior to distribution of the remaining funds. The United States and the Defendant shall provide the Court with information regarding how the Qualified Organizations will use the funds consistent with the above-stated purposes. Defendant must require that fund recipients submit to the United States a detailed report on how these funds are utilized within one year after the funds are distributed, and every year thereafter until the funds are exhausted. Defendant must also require that Qualified Organization(s) return the full amount of funds received for redistribution to other Qualified Organization(s) approved to receive funds in the event that they fail to submit such report(s).

36.

The contract with the Administrator must require the Administrator to maintain the cost free means for consumers to contact it described in Paragraph 25 and finalize distribution of the payments described in Paragraphs 31-32 and 34 within 13 months of the date the Plaintiffs provide the Final Payment List to the Administrator in accordance with Paragraph 31 (“Payment Expiration Date”). Confirmed Consumers shall have until the Payment Expiration Date to request reissuance of payments that have not been deposited. H.

Credit Offers 37.

Defendant must make credit offers as defined in Paragraph 39 to Denied Applicants as outlined below.

38.

Plaintiffs will provide the Administrator a list of Denied Applicants. The Administrator’s contract must require it to adopt effective methods, as requested by Plaintiffs, to identify up-to-date addresses and other contact information for Denied Applicants and to provide Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 19 of 39 PageID #: 75

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this information to Plaintiffs within 60 days of the date Plaintiffs provide the list of Denied Applicants pursuant to this Paragraph.

39.

Within 90 days of the date that the Administrator has identified up-to-date addresses and contact information as set forth in Paragraph 38, Defendant must extend to each Denied Applicant an offer to apply for a Mortgage Loan product of the Denied Applicant’s choosing under Defendant’s underwriting guidelines required by Paragraph 17 of this Order with the following: (a) an interest rate that is the lower of the interest rate available at the time the initial application was denied or the current interest rate less 100 basis points; or (b) the subsidies identified in Paragraph 57(a), (b), (c), and (e) in an amount that is comparable to the value of the difference between the current interest rate and the interest rate reduction required in subparagraph (a) (“credit offer”). Defendant’s correspondence with Denied Applicants will be subject to Plaintiffs’ Non-objection, and will include the minimum objective underwriting criteria for each Mortgage Loan product offered by Defendant’s Community Banking Department. Defendant will pay and/or waive all required application costs and fees for applications that result from offers made pursuant to this Paragraph. 40.

Acceptance of the credit offer described in Paragraph 39 may not be conditioned on the waiver of any right.

41.

For all Denied Applicants who accept the offer to re-apply for credit and are denied by Defendant, Defendant must provide to Plaintiffs the specific reason(s) for the denial and, if requested by Plaintiffs, a copy of the loan application file. 42.

No provision of this Order requires Defendant to make any unsafe or unsound loan or to make a loan to a person who is not qualified for the loan based upon lawful, nondiscriminatory terms; however, Defendant may choose to apply more flexible underwriting Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 20 of 39 PageID #: 76

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standards in connection with these credit offers, so long as those standards comport with safe and sound lending practices.

I.

Community Reinvestment Act Assessment Area 43.

In January 2013, Defendant amended its Community Reinvestment Act (“CRA”) assessment area in the Memphis MSA to include all of Tipton, Shelby, Fayette, DeSoto, and Tate counties. Defendant must continue to include all of these counties in its CRA assessment area during the term of this Order.

44.

Defendant must not eliminate majority-minority neighborhoods from its CRA assessment area within the Memphis MSA throughout the term of this Order. Nothing in this Order precludes Defendant from further expanding its CRA assessment area within the Memphis MSA in a manner consistent with the provisions of the CRA and its implementing regulations. Defendant will provide written notice to Plaintiffs of any changes in its CRA assessment area within the Memphis MSA at the same time such notice is provided to its CRA regulator. Plaintiffs will raise any concerns with such proposed changes to its CRA assessment area with Defendant and its CRA regulator within 30 days.

45.

Defendant will ensure that all of its policies, publications, and marketing materials that refer to the geographic area in which it lends in the Memphis MSA describe an area no smaller than the assessment area described in Paragraph 43. J.

Credit Needs Assessment and Redlining Remedial Plan 46.

Within 30 days of the Effective Date, Defendant must propose an independent third-party consultant (“CNA Consultant”) to conduct an assessment of the Mortgage Loan needs in majority-minority neighborhoods within its CRA assessment area in the Memphis MSA. The selection of the CNA Consultant will be subject to Non-objection by Plaintiffs. This credit needs assessment must include: (a) an analysis of the most recent available demographic and Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 21 of 39 PageID #: 77

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socioeconomic data about the majority-minority neighborhoods; (b) an evaluation of the Mortgage Loan needs of, and corresponding lending opportunities in, these neighborhoods, including but not limited to the need for and feasibility of alternative mortgage and other credit products; (c) consideration of how Defendant’s lending operations can be expanded to serve the remedial goals of providing increased Mortgage Lending in majority-minority neighborhoods in the Memphis MSA and promoting the revitalization and stabilization of the housing market in those neighborhoods; (d) a thorough review of the availability and feasibility of relevant federal, state, and local governmental programs and evaluation of how participation in each of them would assist in achieving the remedial goals of this Order; and (e) meetings with representatives of community organizations significantly involved in promoting fair lending, home ownership, or residential development in affected majority-minority neighborhoods. 47.

Within 60 days of Plaintiffs’ Non-objection to the selection of the CNA Consultant, Defendant must submit to Plaintiffs a written report by the CNA Consultant (“CNA Consultant Report”) of this credit needs assessment containing recommendations that address how each requirement of this Order set forth in Paragraphs 50 - 70 should be carried out to best achieve the remedial goals of this Order.

48.

Within 60 days of the submission of the CNA Consultant’s Report, Defendant must submit to Plaintiffs a Redlining Remedial Plan. The Redlining Remedial Plan must specify, in light of the recommendation made by the CNA Consultant, the actions Defendant proposes to take to comply with the requirements in Paragraphs 50 - 70 of this Order to best achieve the remedial goals of this Order. The Redlining Remedial Plan must also specify timeframes and deadlines for implementation of these actions. As specified below, the proposals within the Remedial Plan will be subject to Plaintiffs’ Non-objection. Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 22 of 39 PageID #: 78

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49.

Within 90 days of the Effective Date, Defendant must hire or designate and retain a full-time Director of Community Lending. The Director of Community Lending must have primary responsibility for overseeing the continued development of Defendant’s Mortgage Lending in majority-minority neighborhoods in the Memphis MSA consistent with the action steps contained in the Remedial Plan; coordinating Defendant’s involvement in community lending initiatives and outreach programs; serving as a resource to lending staff to encourage and develop more Mortgage Lending within majority-minority neighborhoods in the Memphis MSA; promoting financial education and counseling; and building relationships with community groups. The Director of Community Lending must be a member of management and will report directly to the Board (or the Special Compliance Committee). K.

Physical Expansion to Serve Minority Neighborhoods 50.

On November 16, 2015, Defendant opened a full service branch in a majorityminority neighborhood in the Memphis MSA. Subject to any applicable approval of the appropriate regulator, Defendant must open or acquire one additional branch or Mortgage Loan production office (“LPO”) in the Memphis MSA. The branch or LPO must be in a retail-oriented space in a visible location accessible to concentrations of owner-occupied residential properties and located in a high-minority neighborhood.

51.

Defendant must propose a location of this branch or LPO based on the highminority neighborhoods that are in need of credit and, as applicable, banking services, and provide Plaintiffs with its rationale for choosing the particular location. The specific site of the branch or LPO will be subject to the Non-objection of Plaintiffs. Defendant may choose whether to satisfy the requirements of Paragraph 50 with either a branch or an LPO, at its sole discretion. 52.

Defendant must make all reasonable efforts to open the additional branch or LPO required by Paragraph 50 within 12 months of the Effective Date. Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 23 of 39 PageID #: 79

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53.

The additional branch or LPO must provide, at a minimum, the full range of hours of operation typically offered at Defendant’s branches. There must be at least one full-time Mortgage Department loan originator and one full-time Community Banking Department loan officer at the branch or LPO.

54.

Nothing in this Order precludes Defendant from opening or acquiring additional branch offices or LPOs, and nothing contained in the report provided by the CNA Consultant would require Defendant to open more than the one additional branch or LPO required by Paragraph 50. Defendant must evaluate any future opportunities for expansion in the Memphis MSA not required by this Order, whether by acquisition or opening new offices, in a manner consistent with achieving the remedial goals of this Order and must notify Plaintiffs of any plans to open or acquire any new branches or other offices in the Memphis MSA during the term of this Order at the same time that it notifies its prudential regulator(s), so that Plaintiffs may raise any concerns with Defendant and its prudential regulator(s) before regulatory approval is granted. However, Plaintiffs acknowledge that their opportunity to review any application by Defendant to open or acquire new branches is not intended to prevent the application from receiving expedited processing pursuant to 12 C.F.R. § 303.43, or any similar regulation. 55.

Defendant must propose in the Redlining Remedial Plan how it has and will comply with the requirements of Paragraphs 50 -54. This proposal will be subject to Nonobjection by Plaintiffs.

L.

Loan Subsidy Program 56.

Defendant must invest $4,000,000 in a program to extend Mortgage Loans to Qualified Applicants in the Memphis MSA on a more affordable basis than Defendant otherwise makes available to remedy its alleged redlining (“Loan Subsidy Program”). Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 24 of 39 PageID #: 80

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57.

The subsidies under the Loan Subsidy Program will be provided by the following means:

a.

originating a Mortgage Loan at an interest rate below Defendant’s otherwise prevailing interest rate;

b.

a direct grant for down payment assistance;

c.

a direct grant for closing cost assistance;

d.

payment of the initial mortgage insurance premium; and/or e.

other means subject to advance Non-objection by Plaintiffs. 58.

Defendant retains the discretion to offer more than one, or all, of the forms of financial assistance set forth in Paragraph 57 to Qualified Applicants on an individual basis as it deems appropriate under the factual circumstances of a particular application. Defendant will exercise this discretion in a manner that enhances the likelihood that it will originate a loan to a Qualified Applicant consistent with applicable underwriting guidelines and safety and soundness standards, and will have discretion to provide the loan subsidy among its Mortgage Loan products. In no case will the combined forms of financial assistance set forth in Paragraph 57 exceed $7,250.

59.

No provision of this Order requires Defendant to make any unsafe or unsound loan, or to make a loan to a person who is not qualified for the loan based upon lawful, nondiscriminatory terms; however, Defendant may choose to apply more flexible underwriting standards in connection with the Loan Subsidy Program, so long as those standards comport with safe and sound lending practices. Defendant’s underwriting standards applied to properties in majority-minority neighborhoods in the Memphis MSA must be no less favorable than the standards that are applied in other neighborhoods. At the same time, no provision of this Order Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 25 of 39 PageID #: 81

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imposes an obligation on Defendant to apply underwriting standards to applicants that qualify for the Loan Subsidy Program that are more favorable than the standards otherwise applied by Defendant.

60.

The investment of Defendant under the Loan Subsidy Program will consist of the cost to Defendant of providing the subsidies to consumers described in Paragraph 57 and not the cost of implementation of the Loan Subsidy Program. 61.

The methodology used to calculate the total cost to Defendant of the Loan Subsidy Program will be submitted to Plaintiffs for Non-objection in the Remedial Plan. 62.

Defendant must propose in the Remedial Plan how it will implement the requirements of Paragraphs 56 - 61. This proposal will be subject to Non-objection by Plaintiffs. M.

Advertising and Outreach 63.

Defendant must spend a minimum of $100,000 per year during the term of this Order on the targeted advertising and outreach campaign described in Paragraphs 64 - 65. 64.

The advertising and outreach campaign must consider the results of the credit needs assessment required in Paragraph 46, must advertise the Loan Subsidy Program, and must be targeted to generate applications for Mortgage Loans from qualified residents in majorityminority neighborhoods in the Memphis MSA. The campaign must include the following components:

a.

Direct mailings in majority-minority neighborhoods. These mailings must not be targeted exclusively or primarily at existing customers. b.

At least two print media specifically directed to African-American readers. c.

Radio advertisements on at least two radio stations whose programming is directed toward African-American listeners.

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d.

Point-of-distribution materials, such as posters and brochures. Defendant must place these promotional materials in its branch offices in and near majority-minority neighborhoods.

e.

All of Defendant’s direct mailings, print advertising and point-ofdistribution materials must contain an equal housing opportunity logo, slogan, or statement. All of Defendant’s radio advertisements must include the audible statement “Equal Opportunity Lender.”

65.

Defendant must conduct or sponsor at least four outreach programs per year to real estate brokers and agents, developers, and public or private entities engaged in mortgageloan-related business in majority-minority neighborhoods in the Memphis MSA. Through the programs, Defendant must inform the attendees of its products and services, including the Loan Subsidy Program described in this Order, and otherwise develop business relationships with them. Defendant will offer these programs at locations reasonably convenient to the business operations of the attendees.

66.

Defendant must propose in the Redlining Remedial Plan how it will implement the requirements of Paragraphs 63 - 65. This proposal will be subject to Non-objection by Plaintiffs.

N.

Community Development and Financial Education Partnership Program 67.

During 2015, Defendant provided financial literacy training to more than 5,000 residents of the Memphis MSA. The agencies take no position regarding the effectiveness of Defendant’s training program or materials; the parties however do acknowledge that financiallyeducated consumers are essential to the remedial goal of sustained increases in Defendant’s residential lending in majority-minority neighborhoods within the Memphis MSA. The parties Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 27 of 39 PageID #: 83

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also acknowledge that assisting residents of these neighborhoods in maintaining and improving their consumer credit ratings is essential to the remedial goals of this Order. 68.

Defendant or its designee, as agreed to by Defendant and the United States, must partner with one or more community-based organizations or governmental organizations that provide credit, financial education, homeownership counseling, credit repair, and/or foreclosureprevention services to the residents of majority-minority neighborhoods in the Memphis MSA. Defendant must consider organizations that will aid it in achieving the remedial goals of the Order; specifically, the partnerships should aid BancorpSouth in establishing a physical presence in majority-minority neighborhoods; marketing its residential loan products in majority-minority neighborhoods; extending credit to qualified borrowers in majority-minority neighborhoods; providing credit counseling, credit establishment and credit repair services in majority-minority neighborhoods; providing financial education seminars; and assisting with the revitalization and stabilization of the housing market in majority-minority neighborhoods. Defendant must spend a minimum of $500,000 on these partnerships during the term of this Order. 69.

Defendant must propose in the Redlining Remedial Plan how it will implement the requirements of Paragraph 68. Defendant’s proposal must include a thorough review of all relevant organizations; a summary of meetings with these organizations; an examination of any relevant federal, state, or local governmental programs that may assist Defendant and the organization(s) in serving the affected areas; and the basis for the selection of the proposed partner(s). The proposal should also describe in detail how Defendant or its designee, as agreed to by Defendant and the United States, intends to implement the partnership(s) over the term of this Order. This proposal will be subject to Non-objection by the United States. Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 28 of 39 PageID #: 84

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70.

Defendant must annually evaluate its partnership(s), in order to identify any required changes to the program to better meet the residential credit needs of the majorityminority neighborhoods in the Memphis MSA. Defendant must present its evaluation and proposed changes, if any, to the United States for Non-objection. VI. CIVIL MONEY PENALTY 71.

Pursuant to Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the ECOA violations described in the Complaint, and taking into account the factors in 12 U.S.C. § 5565(c)(3), Defendant must pay a civil money penalty of $3,030,756 to the Bureau. 72.

Within 10 days of the Effective Date, Defendant must pay the civil money penalty by wire transfer to the Bureau or the Bureau’s agent in compliance with the Bureau’s wiring instructions.

73.

The Bureau will deposit the civil money penalty paid under this Order in the Civil Penalty Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d). 74.

Defendant must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds, Defendant may not:

a.

Claim, assert, or apply for any tax benefit for any amount of the civil money penalty paid under this Order; or b.

Seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any amount of the civil money penalty paid under this Order. 75.

To preserve the deterrent effect of the civil money penalty in any Related Action, Defendant may not argue that Defendant is entitled to, nor may Defendant benefit by, any offset Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 29 of 39 PageID #: 85

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or reduction of any compensatory monetary remedies imposed in the Related Action because of the civil money penalty paid in this action (“Penalty Offset”). If the court in any Related Action grants such a Penalty Offset, Defendant must, within 30 days after entry of a final order granting the Penalty Offset, notify the Bureau, and pay the amount of the Penalty Offset to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action. VII. RECORD KEEPING AND REPORTING 76.

For the duration of this Order, Defendant must retain all records relating to its obligations under this Order and its compliance activities as set forth herein. Defendant must provide records to Plaintiffs upon request. Within 15 days of any such request under this Paragraph, Defendant must provide to Plaintiffs all requested information that is within its control, and for information not within its control, identify other parties that may have that information. Upon reasonable notice, Defendant must allow Plaintiffs access to Defendant’s records and files to verify the accuracy of the information provided or to otherwise evaluate compliance with this Order.

77.

In addition to the submission of any other plans or reports specified in this Order, Defendant must submit a report to Plaintiffs within 45 days of each anniversary of the Effective Date detailing its progress in fulfilling the requirements of this Order (“Annual Report”). Each Annual Report must be approved by Defendant’s Board and must include an objective assessment of the extent to which each obligation was met, an explanation of why any particular component fell short of meeting the goal for that year, and any recommendations for additional actions to achieve the goals of this Order. If applicable, Defendant must attach to the Annual Reports representative copies of training materials and marketing materials disseminated pursuant to this Order. Plaintiffs will review each report submitted by Defendant and will have Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 30 of 39 PageID #: 86

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30 days to raise any objections to it, and if it raises any, the parties must confer to resolve their differences. In the event they are unable to do so, either party may bring the dispute to the Court for resolution.

VIII. ROLE OF THE BOARD 78.

Defendant’s Board must establish a Special Compliance Committee of at least three members of the Board, no more than one of whom may be an officer or employee of Defendant. Defendant must maintain this Committee during the term of this Order. The Special Compliance Committee will also include the Director of Community Lending described in Paragraph 49, who will report to the Board (or the Special Compliance Committee). Within 20 days of the Effective Date, the Board must provide in writing to Plaintiffs the name of each member of the Special Compliance Committee. In the event of any change of membership, the Board must submit the name of the new member to Plaintiffs within 30 days of the selection of the new member.

79.

The Special Compliance Committee will be responsible for monitoring and coordinating Defendant’s adherence to the provisions of this Order. The Special Compliance Committee will meet at least every other month and will maintain minutes of its meetings. 80.

The Board (or the Special Compliance Committee) must review all submissions (including plans, reports, programs, policies, and procedures) required by this Order prior to submission to Plaintiffs.

81.

Although this Order requires Defendant to submit certain documents for review or Non-objection to the Bureau and/or the United States, the Board will have the ultimate responsibility for proper and sound oversight of Defendant and for ensuring that Defendant complies with federal consumer financial law, including the ECOA, the FHA, and this Order.

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IX. ADMINISTRATION 82.

Calculation of time limitations will be based on calendar days, unless otherwise noted.

83.

Defendant must notify Plaintiffs of any development that may affect compliance obligations arising under this Order, including but not limited to, a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor company; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Order; the filing of any bankruptcy or insolvency proceeding by or against Defendant; or a change in Defendant’s name or address. Defendant must provide this notice, if practicable, at least 30 days before the development, but in any case no later than 14 days after the development. Until the termination of this Order, Defendant must deliver a copy of this Order to any business entity resulting from any change in structure referred to in this Paragraph. 84.

This Order is binding on Defendant, including all of its officers, employees, agents, representatives, assignees, successors in interest, and all those in active concert or participation with any of them. In the event Defendant seeks to transfer or assign all or part of its Mortgage Lending operations during the term of this Order, and the successor or assign intends to carry on the same or similar business practices, as a condition of sale, Defendant must obtain the written agreement of the successor or assign to any obligations remaining under the Order for its remaining term.

85.

This Order will be in effect until the later of: (a) Plaintiffs’ Non-objection to Defendant’s fourth Annual Report; (b) three months after Defendant submits a report to Plaintiffs demonstrating fulfillment of its obligation to invest all money required by this Order; or (c) the date on which the branch or LPO required by Paragraph 50 of this Order has been operated by Defendant for three years. Notwithstanding this provision, the term of this Order Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 32 of 39 PageID #: 88

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may be extended by agreement of the parties or upon motion to the Court by the Plaintiffs, for good cause shown. At any time after the Order has been in effect for three years, the parties may file a joint motion to terminate this Order, which motion may be proposed by Defendant if Defendant has fully complied with all its terms, including, but not limited to, the disbursement of all funds in the Loan Subsidy Program, and accomplished the remedial goals of the Order, as determined by Plaintiffs.

86.

Plaintiffs and Defendant acknowledge that the timeframes set forth in this Order constitute material terms of this Order.

87.

Any time limits for performance fixed by this Order may be extended by mutual written agreement of the parties without further Court approval. Additionally, details related to administration of the Settlement Fund as set forth in Paragraphs 26-36 may be modified by written agreement of the parties without further Court approval. Any other modifications to this Order may be made only upon approval of the Court, upon motion by any party. 88.

In the event that any disputes arise about the interpretation of or compliance with the terms of this Order, the parties must endeavor in good faith to resolve any such dispute between themselves before bringing it to this Court for resolution. The parties agree that if any party reasonably believes that another party failed to comply with any obligation under this Order, it will provide written notice thereof and allow a period of at least 30 days to discuss a voluntary resolution of the alleged violation before presenting the matter to this Court. In the event of either a failure by Defendant to perform in a timely manner any act required by this Order or an act by Defendant in violation of any provision hereof, Plaintiffs may move this Court to impose any remedy authorized by law or equity, including attorneys’ fees and costs. Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 33 of 39 PageID #: 89

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89.

Nothing in this Order excuses Defendant’s compliance with any currently or subsequently effective provision of law or order of a regulator with authority over Defendant that imposes additional obligations on Defendant.

90.

The parties agree that, as of the Effective Date, litigation is not “reasonably foreseeable” concerning the matters described above. To the extent that any party previously implemented a litigation hold to preserve documents, electronically stored information (ESI), or things related to the matters described above, the party is no longer required to maintain such litigation hold. Nothing in this Paragraph relieves any party of any other obligations imposed by this Order or any record retention obligations imposed by statute or regulation. 91.

Defendant’s compliance with the terms of this Order, including any modifications agreed to by the parties or ordered by the Court, will fully and finally resolve all claims of Plaintiffs arising prior to the Effective Date relating to the alleged violations of the fair lending laws alleged in the Complaint in this action, including all claims for equitable relief and monetary damages and penalties; Plaintiffs’ claims, as alleged in the Complaint, that the Bank discriminated in the underwriting and pricing of Mortgage Loans are limited to Mortgage Loans applications submitted by, and Mortgage Loans originated to, natural persons. This Order does not release claims for practices not addressed in the Complaint’s allegations, including claims that may be held or are currently under investigation by any federal agency, or any claims that may be pursued for actions that may be taken by the appropriate Federal Banking Agency, as defined in 12 U.S.C. § 1813(q), against Defendant, any of its affiliated entities, and/or any institution-affiliated party of Defendant, as defined in 12 U.S.C. § 1813(u), pursuant to 12 U.S.C. § 1818 or any other statute or regulation. This Order does not resolve and does not release claims other than claims for discrimination.

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92.

Each party to this Order must bear its own costs and attorney’s fees associated with this litigation.

93.

The Court retains jurisdiction for the duration of this Order to enforce the terms of the Order, after which time the case will be dismissed with prejudice.

SO ORDERED, this 25th day of July, 2016.

/s/ MICHAEL P. MILLS

UNITED STATES DISTRICT JUDGE

NORTHERN DISTRICT OF MISSISSIPPI

The undersigned hereby consent to the entry of this Order: For the Plaintiffs:

Consumer Financial Protection Bureau:

PATRICE ALEXANDER FICKLIN Fair Lending Director

REBECCA J.K. GELFOND Deputy Fair Lending Director

s/Michael Posner______________________ MICHAEL POSNER Fair Lending Enforcement Attorney Email: [email protected] JEFFREY BLUMBERG Senior Fair Lending Enforcement Attorney Email: [email protected] JOSHUA ORENSTEIN Enforcement Attorney Email: [email protected] JESSE D. STEWART Fair Lending Enforcement Attorney Email: [email protected]

Consumer Financial Protection Bureau 1700 G Street NW

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Washington, DC 20552 Tel: (202) 435-7866

United States of America:

s/Felicia C. Adams___________ FELICIA C. ADAMS, MSB #1049 United States Attorney Northern District of Mississippi 900 Jefferson Ave.

Oxford, MS 38655 Tel: (662) 234-3351 Fax: (662) 234-3318

LORETTA E. LYNCH Attorney General

VANITA GUPTA Principal Assistant Attorney General Civil Rights Division

SAMEENA SHINA MAJEED Chief Civil Rights Division Housing and Civil Enforcement Section

JON S. SEWARD Deputy Chief

s/Oneshia S. Herring______________ PATRICIA L. O’BEIRNE Trial Attorney DC Bar # 437018 Email: Patricia.O’[email protected] ONESHIA S. HERRING Trial Attorney NC Bar # 41308 Email: [email protected]

United States Department of Justice Civil Rights Division Housing and Civil Enforcement Section 950 Pennsylvania Avenue, N.W. Northwestern Building, 7th Floor Washington, DC 20530 Tel: (202) 514-4713

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For the Defendant:

s/Anand S. Raman_______________________ ANAND S. RAMAN Email: [email protected] AUSTIN K. BROWN Email: [email protected]

Skadden, Arps, Slate, Meagher & Flom LLP 1440 New York Avenue, NW Washington, DC 20005 Tel: (202) 371-7019

Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 37 of 39 PageID #: 93

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Appendix A I hereby acknowledge that I have received and read a copy of the Consent Order and the Complaint entered in United States and Consumer Financial Protection Bureau v. BancorpSouth Bank. I have had the opportunity to ask questions and obtain answers to them and I understand my fair lending obligations under this Consent Order.

[Signature]

[Print Name]

[Job Title]

[Date] Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 38 of 39 PageID #: 94

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Appendix B I hereby acknowledge that on _______________________ I attended the fair lending training program provided to BancorpSouth Bank employees by ______________________. During the training, I received information about implicit racial bias and my fair lending obligations under the Fair Housing Act, the Equal Credit Opportunity Act, and the terms of the Consent Order entered by the court in United States and Consumer Financial Protection Bureau v. BancorpSouth Bank. I had the opportunity to ask questions and to receive answers to them. I understand my fair lending obligations under this Consent Order and those laws.

[Signature]

[Print Name]

[Job Title]

[Date]

Case: 1:16-cv-00118-MPM-DAS Doc #: 8 Filed: 07/25/16 39 of 39 PageID #: 95

Complaint (June 2016)

PDF of this document (38 pages)

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 1 of 39 PageID #: 1 IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF MISSISSIPPI ABERDEEN DIVISION UNITED STA TES OF AMERICA, and CONSUMER FINANCIAL PROTECTION BUREAU, Plaintiffs, V.

BANCORPSOUTH BANK, Defendant.

Case No.

COMPLAINT INTRODUCTION 1.

Plaintiffs the United States and the Consumer Financial Protection Bureau ("Bureau") bring this action against BancorpSouth Bank ("BancorpSouth" or "Bank") under the Equal Credit Opportunity Act ("ECOA''), 15 U.S.C. §§ 1691-1691f, and the Fair Housing Act ("FHA"), 42 U.S.C. §§ 3601-3619, to remedy discrimination in its mo11gage lending. 1 2.

ECOA and the FHA prohibit creditors from discriminating on the basis of, among other characteristics, race, color, and national origin in their mo11gage lending practices. ECOA and its implementing regulation, Regulation B, 12 C.F.R. pt. 1002, make it illegal for a creditor to discriminate against an applicant in any aspect of a credit transaction, including consumer and business transactions, on the basis of, among other characteristics, race, color, and national origin. 15 U.S.C. § I69l(a); 12 C.F.R. § 1002.4(a). ECOA and Regulation B also prohibit any statements, acts, or practices that would or could discourage on a prohibited basis a prospective 1 For purposes of this Complaint, we define "mortgage loans" as all loans that BancorpSouth was required to report under the Home Mortgage Disclosure Act, 12 U.S.C. §§ 2801 - 2810, and "mortgage lending" as the provision of such loans.

1:16cv118-GHD-DAS

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 2 of 39 PageID #: 2 applicant from applying for credit. 15 U.S.C. § 1691(a); 12 C.F.R. § 1002.4(b); 12 C.F.R. pt. 1002, Supp. I,~ 1002.4(b)(l). The FHA makes it unlawful for any bank to discriminate against any person in making available residential mmtgage loans on the basis of, among other characteristics, race, color, and national origin. 42 U.S.C. § 3605(a). 3.

Bancorp South discriminated in a number of distinct ways through vi1tually every stage of its lending process.

4.

First, BancorpSouth engaged in unlawful redlining by acting to meet the credit needs of majority-White neighborhoods in the Memphis TN-MS-AR Metropolitan Statistical Area ("Memphis MSA" or "MSA") while avoiding the credit needs of majority-minority neighborhoods, thereby engaging in acts or practices directed at prospective applicants that discouraged people in minority neighborhoods from applying for credit. BancorpSouth generates more mo1tgage loan applications in the Memphis MSA than any other MSA in which it operates. 5.

Second, the Bank discriminated against African-American applicants in its underwriting of mo1tgage loans, including loans that the Bank classified as for a consumer purpose and loans that the Bank classified as for a business purpose, by rejecting their applications at significantly higher rates than similarly situated non-Hispanic White ("White") applicants.

6.

Third, the Bank discriminated against African-American borrowers in the pricing of rno1tgage loans, including consumer-purpose and business-purpose transactions, by charging them, on average, 30-64 basis points2 more for first lien and second lien mortgage loans than similarly situated White boITowers.

2 One basis point represents one one-hundredth of a percentage point (0.0 l %).

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 3 of 39 PageID #: 3 7.

Fourth, BancorpSouth implemented a policy and practice that required its employees to treat applicants for mmtgage loans differently based on the applicant's race or other prohibited characteristic. Specifically, the Bank instrncted its loan officers to deny applications from minorities and other "protected class members" more quickly than other applicants and not to provide credit assistance to "borderline" applicants that other applicants may have received that might have improved their chances of being approved for the loan. 8.

In addition, a series of matched-pair tests at several BancorpSouth branches fmther demonstrate the Bank's discrimination against African Americans. The tests revealed that the Bank treated African-American testers less favorably than similarly situated White testers. JURISDICTION AND VENUE 9.

This Court has subject-matter jurisdiction over this action under 12 U.S.C. § 5565(a)(l), 28 U.S.C. § 1331, 28 U.S.C. § 1345, 42 U.S.C. § 3614, and 15 U.S.C. § 169lc(h). 10.

Venue is proper in thisjudicial districtunder28 U.S.C. §§ 139l(b) and (c) and 12 U.S.C. § 5564(f) because BancorpSouth conducts business and has its principal place of business in this judicial district.

PARTIES 11.

Plaintiff United States brings this action to enforce ECOA and the FHA. The Attorney General is authorized to initiate a civil action in federal district comt whenever a matter is referred to her pursuant to 15 U.S.C. § 1691 e(g), or whenever she has reason to believe that a pattern or practice in violation ofECOA has occurred. 15 U.S.C. § 169le(h). The Attorney General is authorized to initiate a civil action in federal district comt whenever she has reasonable cause to believe that a pattern or practice of discrimination in violation of the FHA

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 4 of 39 PagelD #: 4

has occurred or that any group of persons has been denied rights granted by the FHA and such denial raises an issue of general public importance. 42 U.S.C. § 3614(a).

12. Plaintiff the Bureau is an agency of the United States created by the Consumer Financial Protection Act (“CFPA”). 12 U.S.C. § 5491(a). The Bureau has independent litigating authority, including the authority to enforce ECOA. 12 U.S.C. §§ 5564(a) - (b), 5481(12)(D), 5481(14).

13. Defendant BancorpSouth Bank is a depository institution headquartered in Tupelo, Mississippi. BancorpSouth operates branches in eight states: Alabama, Arkansas, Florida, Louisiana, Mississippi, Missouri, Tennessee, and Texas. As of March 31, 2016, BancorpSouth had total assets of $13.9 billion. BancorpSouth is a wholly-owned subsidiary of BancorpSouth, Inc., a financial holding company.

14. BancorpSouth originated mortgage loans through two separate departments® within the Bank. The Mortgage Department typically originated mortgage loans for sale in the secondary market. The Community Bank Department typically originated loans that the Bank kept in its portfolio.

15. From January 1, 2011 to December 31, 2013 (“Relevant Time Period”), BancorpSouth originated approximately 50,554 mortgage loans; approximately 26,718 mortgage loans were originated in its Mortgage Department, and 23,836 in its Community Banking Department.

16, BancorpSouth is subject to the federal laws governing fair lending, including the

FHA, ECOA, and their respective implementing regulations.

* As used in this Complaint, the term “Department” encompasses units that the Bank previously referred to as “Divisions.”

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 5 of 39 PageID #: 5 17.

1;3ancorpSouth is engaged in "residential real estate-related transactions" within the meaning of the FHA, 42 U.S.C. § 3605, and is a "creditor" within the meaning ofECOA, 15 U.S.C. § 1691a(e).

FACTUAL ALLEGATIONS Redlining in the Memphis MSA 18.

BancorpSouth engaged in unlawful redlining by acting to meet the credit needs of majority-White neighborhoods in the Memphis MSA while avoiding the credit needs of majority-minority neighborhoods (census tracts with a minority population greater than 50 percent), and thereby engaged in acts or practices directed at prospective applicants that discouraged people from applying for credit in those neighborhoods, as described in the following paragraphs.

19.

Banco1pS0uth generates more mo1tgage loan applications for prope1ties within the Memphis MSA than in any other MSA. During the Relevant Time Period, BancorpSouth originated approximately 4,540 mmtgage loans in the Memphis MSA. BancorpSouth is among the largest lenders in the Memphis MSA, ranking 2nd, 3rd and 4th in 2011, 2012, and 2013, respectively, in its number of first-lien mo1tgage loan miginations, out of approximately 400 lenders operating in the MSA.

20.

The Memphis MSA is comprised of eight counties in three states: Tunica, Tate, Desoto, and Marshall Counties in Mississippi; Crittenden County, Arkansas; and Shelby, Tipton, and Fayette Counties in Tennessee.

21.

The Memphis MSA contains a significant number of minorities and mino1ity neighborhoods. As of 2010, the Memphis MSA's population was 1,3 16,100, of which 46.4 percent were African American, 4. 7 percent were Hispanic, and 46.2 percent were White. Nearly

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 6 of 39 PageID #: 6 half of the population of the MSA, 646,889 people, live in the p1incipal city of Memphis, Tennessee, in Shelby County. Of these Memphis residents, 63.3 percent were African American, 6.5 percent were Hispanic, and 27.5 percent were White. Eighty percent of the minority population of the Memphis MSA lives in Shelby County, Tennessee. 22.

As of 20 10, 115 of the MSA's 312 neighborhoods (36.9 percent) were highminority ( census tracts with a minority population greater than 80 percent) and over half ( 51.6 percent) were majority-minority.

CRA Assessment Area 23.

Until January 23, 2013, BancorpSouth excluded nearly all majority-minority neighborhoods in the Memphis MSA from its Community Reinvestment Act ("CRA") area. By doing so, BancorpSouth reduced credit availability and investment in those neighborhoods and discomaged prospective applicants and lending in those neighborhoods. 24.

Congress enacted the CRA to encourage financial institutions to "help meet the credit needs of the local communities in which they are chartered." 12 U.S.C. § 290l(b). The CRA is an impo11ant safeguard for minority neighborhoods that have been traditionally underserved by creditors. 4 25.

Under implementing regulations promulgated by the FDIC, a bank must "delineate one or more assessment areas within which the FDIC evaluates the bank's record of helping to meet the credit needs of its conununity." 12 C.F.R. § 345.41 (a). In other words, the CRA and its implementing regulations required BancorpSouth to select the geographic 4 Plaintiffs do not have authority to enforce the CR.A and do not purport to do so here. Rather, Plaintiffs cite to the Bank's exclusion of majority-minority neighborhoods from its designated assessment area as evidence that the Bank engaged in unlawful discrimination in violation of ECOA and the FHA.

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 7 of 39 PageID #: 7 boundaries of "its community" whose credit needs it would help to meet, called an "assessment area."

26.

The CRA also requires that a bank maintain a file available to the public that includes, among other things, "[a] map of each assessment area showing the boundaries of the area and identifying the geographies contained within the area." 12 C.F.R. § 345.43. Thus, BancorpSouth must make the geographic boundaries of the Bank's community available to prospective applicants.

27.

Until January 23, 2013, the Bank divided its assessment area within the Memphis MSA into eleven areas, with one Bank president responsible for each area ("pre-January 2013 assessment area"). These Bank presidents had wide discretion in the final dete1mination of the boundaries of their assessment area. BancorpSouth did not have a policy governing how these assessment areas were chosen, and Bank presidents did not document reasons why they chose the area they would serve.

28.

BancorpSouth created this pre-January 2013 assessment area prior to 20 l 0. Based on 2000 census data, BancorpSouth's pre-January 2013 assessment area excluded all 91 highminority neighborhoods and 137 of the 142 majority-minority neighborhoods (96.5 percent) in the Memphis MSA, including minority neighborhoods near existing branches that easily could have been drawn into the assessment area. See Exhibits A and B. 29.

BancorpSouth selected all or pa11 of five out of the eight counties in the Memphis MSA to include in its pre-January 2013 assessment area: Tipton, Fayette, and Shelby Counties in Tennessee, and Desoto and Tate Counties in Mississippi. For counties with few or no majorityminority neighborhoods, the Bank selected all or most of the county to be in its assessment area. BancorpSouth selected all of Tipton County, which had only one majority-minority tract; all of

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 8 of 39 PageID #: 8 Fayette County, which also had only one majority-minority tract; all of Desoto County, which had no majority-minority tracts; and three of the four tracts in Tate County, which had no majority-minority census tracts. The Bank selected, however, only 58 of the 216 census tracts in Shelby County, Tennessee, which contains the city of Memphis, thereby excluding 123 of Shelby County's 126 majority-minority neighborhoods (97.7 percent) and all of its 85 highminority neighborhoods. In other words, BancorpSouth selected only 27 percent of the tracts from the most heavily minority county in the MSA, and in doing so excluded nearly every one of its minority neighborhoods. See Exhibit A.

30.

Based on 2000 census data, the Bank's delineation excluded approximately 85 percent of the 523,000 African Americans living in the Memphis MSA from its CRA assessment area.

31.

BancorpSouth discouraged mortgage lending outside of its CRI\. assessment area. The Bank's General Loan Policy provided that the Bank's "primary trade area" was its CRA assessment area and that loans made outside this trade area were "undesirable." The Bank also assigned annual CRA goals to each of the eleven assessment areas within the Memphis MSA to ensure that the credit needs of those communities were being met. Bank presidents would not receive CRA credit towards meeting these goals for loans made outside of the Bank's assessment area.

32.

In keeping with this policy, BancorpSouth encouraged its loan officers to be active in the communities within its assessment areas. These loan officers were generally aware of the Bank's assessment area delineations, and the Bank made maps of its assessment areas accessible to loan officers. By the Bank's own admission, it has always focused its lending effo1ts within its assessment areas.

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 9 of 39 PageID #: 9 33.

The Bank's exclusion of nearly all majority-minority neighborhoods from its CRA assessment area reduced credit availability and investment in those neighborhoods and discouraged prospective applicants and lending in those neighborhoods. 34.

On January 23, 2013, the Bank amended its CRA assessment area to include all census tracts in each county in the Memphis MSA in which the Bank had a branch: DeSoto and Tate Counties in Mississippi, and Tipton, Fayette, and Shelby Counties in Tennessee. However, the amended assessment area did not alter the Bank's practice of discouraging prospective applicants for credit in minority communities. The Bank did not open or acquire any new branches in majority-minority neighborhoods, and the Bank's propo11ion of applications from minority neighborhoods stayed nearly the same. In both 2011 and 2012, the Bank drew 3.2 percent of its applications from high-minority neighborhoods and 8.6 percent of its applications from majority-minority neighborhoods. In 2013, it drew 3 .3 percent of its applications from high-minority neighborhoods and 9.0 percent of its applications from majority-minority neighborhoods. Nor did the assessment area change improve the Bank's generation of applications from minority neighborhoods as compared to its peers. Branch Locations 35.

BancorpSouth concentrated its branches to serve the credit needs in areas outside of, and avoid lending in, minority neighborhoods, thereby discouraging prospective applicants in those minority neighborhoods. During the Relevant Time Period, BancorpSouth operated 22 branches in the Memphis MSA. Based on 2000 census data, all 22 of the Bank's branches were located outside of majority-minority neighborhoods. See Exhibit C. Based on 2010 census data, four of these branches are now located in majority-minority neighborhoods, due to populationshifting demographics rather than actions by the Bank to serve minority communities.

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 10 of 39 PageID #: 10 36.

The Bank's branches played a key role in its ability to draw mo11gage loan applications. Most (70 percent) of the mo11gage loan applications submitted to the Bank were for properties within 5 miles of its 22 branches.

37.

Where BancorpSouth strayed from this pattern of lending in close proximity to its branches, it did so in a manner that dispropo11ionately yielded applications from majority-White neighborhoods and White applicants. Specifically, in areas at least 5 miles from any branch, the Bank drew 87 percent of applications from majority-White areas and only 13 percent from majority-minority neighborhoods; only 5 percent of applications came from high-minority neighborhoods; and even among the 13 percent of applications that came from majority-minority neighborhoods, most were from White applicants (64 percent). 38.

The Memphis MSA, including its minority neighborhoods, is well-suited for new branches, a fact BancorpSouth has been aware of since at least Febmary 2011. 39.

In Febrnary 2011 , BancorpSouth's consultant analyzed the market potential of 222 areas and concluded that the Memphis MSA should be targeted for near-term branch expansion. The consultant assigned the Memphis MSA its highest rating for expansion oppo11unities. Moreover, Shelby County, which contains the city of Memphis and has a majority African-American population (52 percent), was one of two counties in the MSA to receive the highest rating.

40.

In July 2011 , a second consultant concluded that the Memphis MSA "offers BancorpSouth many of the top expansion options corporate-wide" because of, among other things, its market quality and relatively low branch saturation from competitors. The consultant informed the Bank that the Memphis MSA contained 16 submarkets with viable branch opportunities. Six of these viable branch locations are in high-minority census tracts. See Exhibit

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 11 of 39 PageID #: 11 D. The consultant recommended targeting the Memphis MSA as a "top marketwide expansion priority."

41.

At least since late 2013 or early 2014, BancorpSouth has been aware that its propo11ions of applications and originations in minority communities are "significantly lower" than those of its peers. Yet the Bank sought to open a branch in a minority tract in the Memphis MSA only recently-in February 2015-after the Bureau informed the Bank in December of 2014 of the Bureau's then-preliminary conclusion that the Bank had engaged in redlining. Marketing 42.

BancorpSouth focused advertising in majority-White neighborhoods but failed to adve11ise meaningfully in majority-minority neighborhoods. BancorpSouth focused its marketing efforts on promoting individual loan officers, the vast majority of whom were White, and their branch locations, which were located predominantly in majority-White areas. 43.

Of the 86 loan officers who worked in the Memphis MSA during the Relevant Time Period, 83 (96.5 percent) were White.

44.

Additionally, BancorpSouth engaged in three direct-mail marketing campaigns for mortgage loan and other products between 2011 and 2013. These mailings were overwhelmingly mailed to majority-White neighborhoods. BancorpSouth sent approximately 38,000 direct mailings in these campaigns, of which 90 percent went to majority-White areas and just 5 percent went to high-minority neighborhoods. 45.

BancorpSouth has not specifically targeted any marketing towards minority communities.

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 12 of 39 PageID #: 12 Applications from Minority Neighborhoods 46.

From at least 2011 tlu-ough the present, the Ban.k's policies and practices directed at prospective applicants, including but not necessarily limited to its CRA assessment area delineation, branch locations, and marketing practices, discouraged prospective applicants in minority neighborhoods from applying for credit.

47.

Statistical analysis of BancorpSouth's mo1tgage applications in the Memphis MSA as compared to its peers showed disparities in lending to majority-minority neighborhoods between BancorpSouth and its peers. These disparities are statistically significant and show that there were applicants seeking m01tgage loans in majority-minority neighborhoods in the Memphis MSA. These disparities further show that BancorpSouth had no legitimate, nondiscriminatory reason to draw relatively few applications from these majority-minority areas. 48.

Bancorp South has drawn a smaller propo1tion of mortgage loan applications from minority neighborhoods than its peer lenders operating in the Memphis MSA. From 2011 tlu·ough 2013, BancorpSouth drew 5,762 total mo1tgage loan applications in the MSA. Only 3.2 percent of those applications - 185 total - were for properties in high-minority neighborhoods, even though 36.9 percent of the MSA's tracts are high-minority. Only 9.0 percent of its mortgage loan applications came from majority-minority neighborhoods, even though 51.6 percent of the MSA's tracts are majority-minority. In contrast, BancorpSouth generated 91.0 percent of its applications from majo1ity-White neighborhoods, while only 48.4 percent of the MSA's tracts are majority-White. See Exhibit E.

49.

Bancorp South's peers generated a larger proportion of their applications from minority neighborhoods in the Memphis MSA. While BancorpSouth drew 3.2 percent of its applications from high-minority neighborhoods from 2011 tlu·ough 2013, the Bank's peers drew

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 13 of 39 PageID #: 13 17 .6 percent of their applications from such neighborhoods-five-and-a-half times that of BancorpSouth. BancorpSouth generated 9 .0 percent of its applications from majority-minority tracts from 2011 through 2013, while its peers generated 27.6 percent-more than three times that of BancorpSouth.

50.

These disparities between BancorpSouth and its peers show that there were applicants seeking mortgage loans in majority-minority and high-minority neighborhoods in the MSA. These disparities are statistically significant. 5 These disparities cannot be explained by a legitimate, non-discriminatory reason.

51.

The totality of BancorpSouth's acts, policies, and practices described herein constitute the redlining of majority-minority neighborhoods in the Memphis MSA. BancorpSouth's acts, policies, and practices directed at prospective applicants are intended to deny and discourage, or have the effect of denying or discouraging, an equal oppo1tunity to the prospective applicants of the majority-minority neighborhoods of the Memphis MSA to obtain mortgage loans on the basis of the racial and ethnic composition of those neighborhoods. Mortgage Loan Underwriting 52.

BancorpSouth's Community Banking Department has consistently rejected African-American applicants for mortgage loans at significantly higher rates than similarly situated White applicants. The Bank granted its Community Banking Department employees substantial discretion to decide whether or not to approve a mo1tgage loan application. In contrast, the Bank's Mortgage Department made nearly all credit decisions through an automated underwriting system.

5 Statistical significance measures the probability that an observed outcome could have occuned by chance. As used in this Complaint, an outcome is statistically significant if the probability that it could have occuned by chance is less lhan five percent.

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 14 of 39 PageID #: 14 53.

From January 1, 201 1, through December 31, 2013, BancorpSouth's Community Banking Department accepted approximately 26,208 mortgage loan applications. Approximately 9,618 of these applications (36.7%) were classified by the Bank as for a business purpose while approximately 16,590 (63.3%) were classified as for a consumer purpose. All of these applications were manually underwritten by Bank employees, rather than unde1written by an automated system, as with the Mortgage Depai1ment.

54.

From at least January 1, 2011, until at least January 2013, individual Community Banking Depaiiment loan officers unde1wrote- that is, made the decision whether to approve or deny-mortgage loan applications, with the exception of certain home equity loans that were centrally unde1written beginning in 2005. From at least January 1, 2011 , until at least January 2013, BancorpSouth gave individual loan officers in its Community Banking Depai1ment wide discretion to approve or deny mo,tgage loan applications. 55.

The Bank's General Loan Policy, which governed the Community Banking Department's unde1writing, provided only minimal guidance on how bonower or loan characteristics should affect the underwriting decision, and BancorpSouth loan officers had wide discretion within these very generalized parameters.

56.

For instance, the General Loan Policy was silent as to how an applicant's credit score should affect the underwriting decision for mortgage loans other than home equity loans. It was up to the individual Joan officer evaluating the mo11gage loan application to decide how a broad range of credit scores affected whether or not the application should be approved. 57.

Similarly, the General Loan Policy provided only recommended maximum loanto-value ratios for non-home equity mo11gage loans, but Bank loan officers were free to exceed

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 15 of 39 PageID #: 15 these recommended limits. The Bank did not require that loan officers provide any justification for exceeding these recommended limits.

58.

BancorpSouth did not require that loan officers document how bo1rnwer or loan characteristics influenced their decision on a m01igage loan application. 59.

As shown by statistical analysis of mortgage loan data provided by BancorpSouth, from at least 20 l l through 2013, the Bank's Community Banking Depai1ment denied African- American applicants more often than similarly situated, White applicants. These racial disparities in unde1writing are statistically significant.

60.

Plaintiffs conducted a statistical regression analysis of the Bank's mo11gage loan application data for applications submitted by natural persons to the Bank's Community Banking Depa11ment from 2011 through 2012. Plaintiffs analyzed mortgage loan data for both consumerpurpose loans and business-purpose loans. The statistical analysis shows that African-American applicants to the Community Banking Depaitment were denied first-lien m011gage loans at a rate 9.5 percentage points higher than the rate at which they would have been denied if they had been White. In relative terms, this means that African-American applicants were denied at a rate 1.9 times the expected rate if they had been White.

61.

In 2011 and 2012, African-American applicants to the Community Banking Depa11ment were denied second-lien mortgage loans at a rate 12.3 percentage points higher than the rate at which they would have been denied if they had been White. In relative terms, this means that African-American applicants were denied at a rate 13.6 times the expected rate if they had been White.

62.

In 2011 and 2012, African-American applicants to the Community Banking Depart ment for unsecured home improvement loans were denied at a rate 8.3 percentage points

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 16 of 39 PageID #: 16 higher than the rate at which they would have been denied if they had been White. In relative te1ms, this means that Afiican-American applicants were denied at a rate 1.4 times the expected rate if they had been White.

63.

In January 2013, the Community Banking Department initiated a pilot program to have underwriters in a central location, rather than individual loan officers, underwrite ce1tain consumer loans, and by March 2014, all mo1tgage loan products were centrally underwritten by underwriters. Nonetheless, the Bank granted these central underwriters the same wide discretion to make credit decisions that it had previously granted its individual loan officers. 64.

Plaintiffs conducted a statistical regression analysis of the Bank's mortgage loan application data for applications submitted by natural persons to the Bank's Community Banking Depaitment in 2013. Plaintiffs analyzed mortgage loan data for both consumer-purpose loans and business-purpose loans. In 2013, after the Bank had begun transitioning to central underwriting, racial disparities substantially worsened, however. In 2013, African-American applicants to the Community Banking Depa1tment were denied first-lien mortgage loans at a rate 16.8 percentage points higher than the rate at which they would have been denied if they had been White. In relative terms, this means that African-American applicants were denied at a rate 2.7 times the expected rate if they had been White.

65.

In 2013, African-American applicants to the Community Banking Department were denied second-lien mo1tgage loans at a rate 25.5 percentage points higher than the rate at which they would have been denied if they had been White. In relative terms, this means that African-American applicants were denied at a rate 4.6 times the expected rate if they had been White.

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 17 of 39 PageID #: 17 66.

In 2013, African-American applicants to the Community Banking Department for unsecured home improvement loans were denied at a rate 21. 5 percentage points higher than the rate at which they would have been denied if they had been White. In relative te1ms, this means that African-American applicants were denied at a rate 1.9 times the expected rate if they had been White.

67.

Looking at 2011 through 2013 combined, African-American applicants were denied substantially more often than similarly situated White applicants. During that time, African-American applicants to the Community Banking Department were denied first-lien mortgage loans at a rate 11.9 percentage points higher than the rate at which they would have been denied if they had been White. In relative terms, this means that African-American applicants were denied at a rate 2.2 times the expected rate if they had been White. 68.

In 2011 th.rough 2013, African-American applicants to the Community Banking Depaitment were denied second lien mo1tgage loans at a rate 12.5 percentage points higher than the rate at which they would have been denied if they had been White. In relative terms, this means that African-American applicants were denied at a rate 2.9 times the expected rate if they had been White.

69.

In 2011 through 2013, African-American applicants to the Community Banking Depmtment were denied unsecured home improvement loans at a rate 12.1 percentage points higher than the rate at which they would have been denied if they had been White. In relative te1111s, this means that African-American applicants were denied at a rate 1.5 times the expected rate if they had been White.

70.

The Bank's policies and practices of granting its employees wide discretion to make credit decisions and the Bank's inadequate controls and monitoring- both of which

Page 62

Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 18 of 39 PageID #: 18 continue to the present- caused these racial disparities. These racial disparities in underwriting cannot be explained by the Bank's consistent consideration of risk-related factors. Rather, these disparities stem from discrimination on the basis of race by BancorpSouth. 71.

These disparities mean that over 300 African-American applicants were denied mortgage loans because of their race from 201 1 through 2013. 72.

These disparities cannot be explained by a legitimate, nondiscriminatory reason. Moreover, BancorpSouth's underw1iting policies and practices identified in the previous paragraphs were not justified by a legitimate business need. 73.

There were also less discriminatory alternatives available to BancorpSouth than these policies and practices.

Mortgage Loan Pricing 74.

From January 2011 until at least December 2013, BancorpSouth's Community Banking Department charged higher loan prices to African-American borrowers than it charged White borrowers. The higher prices were not based on their creditworthiness or other objective criteria related to borrower risk, but, instead, were based on race. 75.

Similar to its underwriting policies and practices, there were key differences between the Bank's pricing policies in its Mot1gage Department and its Community Banking Depaitment. The Mo11gage Department limited discretion by relying on rate sheets that listed m011gage loan prices that should be charged based on risk-based borrower and loan characteristics. In contrast, the Bank's Community Banking Depaitment did not rely on rate sheets until at least October 2013. From at least January 2011 until at least October 2013, BancorpSouth granted its Co1mnunity Banking Depa1iment loan officers nearly unfettered

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 19 of 39 PageID #: 19 discretion to set the price of mortgage loans, including setting the interest rate and what percentage of the loan amount the Bank charged as an origination fee. 6 76.

The only limitation the Bank imposed on mo1tgage loan price setting in the Community Banking Department was generally not allowing loan officers to originate loans that met the definition of "Higher-Priced Mo1tgage Loans" in Regulation Z, 12 C.F.R. § 226.35(a). Yet the Bank allowed business-purpose loans to exceed even this cap. 77.

The General Loan Policy states that "[!Joan Pricing is not an exact science, and it is intended that Loan Officers have some flexibility in the pricing of credits." The General Loan Policy lists "some" of the risk-related factors "that affect the price of a loan," but is silent as to how these factors should affect loan price.

78.

BancorpSouth did not require that loan officers document the factors that they considered when setting the price of a m01tgage loan. 79.

BancorpSouth had no process to ensure that different loan officers considered risk-related criteria (such as credit score) in similar ways or that the same loan officer considered them consistently from one loan to the next.

80.

Plaintiffs conducted a statistical regression analysis of the annual percentage rate ("APR") charged by BancorpSouth for mortgage loans to natural persons originated by its Community Banking Depaitment, including consumer-purpose loans and business-purpose loans. That analysis accounted for whether BancorpSouth classified the loan as a businesspurpose loan.

6 Certain Community Banking Division home equity loan products were centrally priced beginning in 2005 by a Bank unit called the Equity Credit Center. These Equity Credit Center loans are not included in the Complaint's reference to "mortgage loans" in paragraphs 74 - 87.

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 20 of 39 PageID #: 20 81.

Plaintiffs' statistical analysis shows that, from at least 2011 tlu·ough 2013, the Bank's Community Banking Depaitment charged African-American borrowers higher prices for mo1tgage loans than similarly situated White boJTowers. These disparities are statistically significant.

82.

From 2011 tlu·ough 2013, BancorpSouth charged African-American borrowers of first-lien mo1tgage loans, on average, APRs that were 30.3 basis points higher than APRs of similarly situated White borrowers.

83.

From 2011 through 2013, BancorpSouth charged African-American borrowers of second-lien mo1tgage loans, on average, APRs that were 63.9 basis points higher than APRs of similarly situated Whit~ bo1rnwers.

84.

These racial disparities in pricing cannot be explained by the Bank's consistent consideration of risk-related factors. Rather, these pricing disparities stem from the Bank's policies and practices of granting its employees nearly unfettered discretion to set loan prices and the Bank's inadequate controls and monitoring of those policies and practices. 85.

These racial disparities mean that from 2011 through 2013 over 900 African- American borrowers paid higher fees and/or additional interest in each monthly m01tgage payment because of their race. On average, an African-American boJTower paid $360 more than a similarly situated White borrower each year he or she held the loan. 86.

These pricing disparities cannot be explained by a legitimate, nondiscriminatory reason. Moreover, BancorpSouth's pricing policies and practices identified in the previous paragraphs were not justified by a legitimate business need. 87.

There were also less discriminatory alternatives available to BancorpSouth than its pricing policies and practices.

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 21 of 39 PageID #: 21 Discriminatory Denial Policy and Practice 88.

BancorpSouth implemented a policy or practice in its Mortgage Department that required its employees to treat applicants for mo11gage loans differently based on the applicant's race, color, national origin, or other prohibited characteristic. Specifically, the Bank instrncted loan officers to "turn[] down" minority applicants more quickly than White applicants and not to provide credit assistance to "borderline" applicants that other applicants may have received. 89.

The Bank's explicitly race-based denial policy would put minorities and others it viewed as protected class members who may be marginally qualified at a disadvantage to receive credit assistance that may have improved their chances of being approved for the loan. 90.

An audio recording of an internal meeting at BancorpSouth in or around September 2012 clearly articulates the Bank's policy or practice to reject minority applicants more quickly than White applicants, as well as the Bank's perception of African Americans. The meeting pa11icipants were all White and included at least one BancorpSouth manager, loan officers, and loan processors.

91.

Regulation B requires that a lender notify all applicants, regardless of race or any other protected characteristic, of a decision on an application for credit within 30 days of receiving a completed application. 12 C.F.R. § 1002.9(a)(l)(i). 92.

At the meeting, a BancorpSouth manager instructed loan officers and processors under her supervision that mortgage applications from minorities and others whom BancorpSouth viewed as "protected class" me~bers must be "turned down" in 21 days and that "borderline" customers should be turned down quickly, while applications from White applicants were not subject to this sho11er review period. The Bank generally pennitted loan officers to assist marginal applicants; the explicitly race-based denial policy depai1ed from that practice.

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 22 of 39 PageID #: 22 93.

When asked for an explanation for the explicitly race-based denial policy, the manager stated, "I think it's lawsuits, it's lawsuits, and we just dodged a really large bullet." According to the Bank manager, a minority applicant whose application had been delayed had previously threatened to sue BancorpSouth, and the Bank was concerned about similar lawsuits from other minorities.

94.

Later in the meeting, a loan officer asked the manager whether loan officers should help marginally qualified applicants improve their credit scores so their applications would be approved. The manager cautioned against doing so stating that "you are gonna spend two weeks trying to get it re-scored and get that credit score up and by that time they're mad and sending you mean letters."

95.

The audio recording also documented Banco1pS0uth employees making derisive c01mnents about minorities following the manager's articulation of the race-based denial policy. 96.

In discussing the explicitly race-based denial policy, a loan officer c01mnented that "they need to get their credit up" and "stop paying their damn bills late" and then laughed. 97.

In response to a loan officer noting that all of the meeting pa1ticipants were White, the manager stated "I'm sure I'll hear about that soon, too. I'm looking. I don't know where I'll put one, but I'm looking."

98.

In discussing the Bank's hiring of an African-American employee, a loan processor cautioned, "don't use then-word." A few moments later, a Bank employee quipped "what's up, niggas!" Both of these comments were followed by laughter in the room. Discrimination in Application Inquiries 99.

In addition, a series of matched-pair tests at several BancorpSouth branches is fmther evidence of the Bank's discrimination against, including discouragement of, African

Page 67

Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 23 of 39 PageID #: 23 Americans. In 2013, the Bureau conducted a series of matched-pair tests to evaluate whether BancorpSouth treated individuals who inquired about m011gage loans similarly regardless of race and color. In each test, the Bureau sent an African-American tester and a White tester to the same BancorpSouth branch within ten days of each other. The testers posed as first-time homebuyers and asked the same BancorpSouth Mo11gage Depaitment loan officer about their eligibility for a mortgage loan. Each African-American tester was assigned a slightly better financial profile than the cotTesponding White tester, including a higher credit score, higher monthly income, more funds available for down payment, less debt, and more favorable info1mation in their credit history. The testing showed that BancorpSouth's loan officers treated African-American testers less favorably than White testers, as described below. Madison, Alabama 100.

At a BancorpSouth branch in Madison, Alabama, the loan officer provided inf01mation encouraging the African-American tester to apply for a Federal Housing Administration-insured loan ("FHA loan"), while encouraging the White tester to apply for a loan guaranteed by the U.S. Department of Agriculture ("USDA loan"). The FHA loan was more expensive and therefore would have limited the African-American tester to purchasing a less expensive home despite a higher down payment and a higher monthly payment. 101.

Specifically, the loan officer gave inconsistent infonnation about the Bank's minimum credit score, thus limiting the African-American tester's loan options. The loan officer told the White tester, who had a 622 credit score, that "620 is the minimum" credit score requirement and so "you qualify for every program" BancorpSouth offers, including conventional mortgage loans, FHA loans, USDA loans, and an Alabama mortgage loan program. Just nine days earlier, the same loan officer told the African-American tester, who had a higher

Page 68

Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 24 of 39 PageID #: 24 625 credit score, that "n01mally they want you to have a 640 credit score" and conventional mortgage loans are "not as lenient" as FHA loans, so an FHA loan was the "better bet" for her. According to the Bank's guidelines, the minimum credit score for both conventional loans and FHA loans was 620. The African-American tester did not express a preference for an FHA loan over a conventional loan.

102.

The loan officer provided a written closing cost and monthly payment estimate to the White tester but not to the African-American tester. Therefore, the loan officer provided less helpful information to the African-American tester than the White tester. 103.

The loan officer recommended different products and quoted higher fees to the African-American tester than the Federal Housing Administration charges. As a result, the loan officer told the Afiican-American tester, who had a higher income, that she could afford a home priced $5,000 lower than the White tester, despite the African-American tester having a $3,500 higher down payment and a higher monthly payment. These differences were on the basis of the race and color and not risk-related characteristics of the testers. Birmingham, Alabama 104.

At a BancorpSouth branch in Birmingham, Alabama, a loan officer told both the African-American tester and the White tester that they would qualify for a $200,000 home. But the loan officer told the White tester to call her if she found a house for $235,000 to see if she qualified for a loan, while telling the African-American tester to call her if she found a house for $210,000 to see if she qualified. The loan officer made these statements even though the African- American tester had a higher income, less debt, and more funds available for a down payment than the White tester.

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 25 of 39 PageID #: 25 105.

In addition, the Biimingham branch loan officer recommended to the White tester that she make a down payment of ten percent of the purchase price if she found a $200,000 home. In order to estimate a monthly payment, the same loan officer assumed the African- American tester would put down only five percent to purchase a $200,000 home, even though the African-American tester had more money available for a down payment and told the loan officer that she felt comfortable putting down more than five percent. A lower down payment would have resulted in a larger loan amount and therefore a higher monthly payment for the African-American tester.

106.

The Binningham branch loan officer estimated over $600 more in closing and prepaid costs for the African-American tester than the White tester by estimating higher attorney's fees and other costs for the African-American tester. This difference would make the African-American tester's loan more expensive than the White tester's loan. 107.

These differences were on the basis of the race and color and not risk-related characteristics of the testers.

Memphis, Tennessee 108.

At a BancorpSouth branch in Memphis, Tennessee, the loan officer told the White tester that the maximum debt-to-income ratio for an FHA loan was "mid-50s, 52, 53" percent. Just five days later, the same loan officer told the African-American tester, who had a higher credit score, that FHA "usually with decent credit" permits a maximum debt-to-income ratio of only "50 percent." The loan officer calculated the White tester's maximum monthly payment based on a 52 percent debt-to-income ratio and the African-American tester's maximum monthly payment based on a 50 percent debt-to-income ratio. The loan officer had no legitimate reason to impose this requirement differently. This difference would give the White tester the ability to

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 26 of 39 PageID #: 26 purchase a more expensive home relative to his income and debt than the African-American tester.

109.

These differences were on the basis of the race and color and not risk-related characteristics of the testers.

Tupelo, Mississippi 110.

At a Tupelo, Mississippi branch, a loan officer, unprompted by the White tester, provided her with recommendations and contact infonnation for three realtors who the loan officer described as "really, really good ones," including one realtor who had represented the loan officer's son and niece. The same loan officer told the African-American tester to "get a good realtor" but did not give her any recommendations or contact info1mation. The loan officer had no legitimate reason to provide different levels of assistance. 111.

Also unprompted, the loan officer gave the White tester detailed advice on a number of locations to look for a home, including an area with more affordable homes, another "nice, quiet neighborhood" with a "really good school district" where "prope1ties hold their value really well," and other locations that would be an easy commute for the White tester. The loan officer did not give any advice on locations to the African-American tester, even though the African-American tester asked the loan officer whether she suggested living in the city of Tupelo or outside it. The loan officer had no legitimate reason to provide less assistance to the African- American tester.

112.

These differences were on the basis of the race and color and not risk-related characteristics of the testers.

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 27 of 39 PageID #: 27 EQUAL CREDIT OPPORTUNITY ACT VIOLATIONS Count 1 (Redlining) 113.

Plaintiffs incorporate the allegations in Paragraphs 1- 112 here by reference. 114.

BancorpSouth's policies and practices constitute the unlawful redlining of majority-minority communities in the Memphis MSA. BancorpSouth's acts and practices directed at prospective applicants discouraged prospective applicants from applying for credit on the basis of race, color, or national origin in violation of Regulation Band ECOA. 12 C.F.R. § 1002.4(b); 15 U.S.C. § 169l(a)(l).

115.

BancorpSouth disc1iminated against applicants with respect to credit transactions on the basis of race, color and national origin in violation ofECOA, 15 U.S.C. § 169l(a)(l). 116.

BancorpSouth's practices constitute a pattern or practice of discrimination and discouragement in violation ofECOA, 15 U.S.C. § 1691(a)(l). 117.

BancorpSouth's pattern or practice of disc1imination was intentional and willful and was implemented with reckless disregard for the rights of African-American applicants and applicants of other prohibited basis groups.

Count 2 (Underwriting) 11 8.

Plaintiffs incorporate the allegations in Paragraphs 1 - 112 here by reference. 119.

BancorpSouth, through intent and/or effect of its underwriting policies and procedures, denied mortgage loan applications of African-Americans more often than applications of similarly situated White applicants. These underwriting disparities were on the basis of race and were not based on legitimate loan or borrower characteristics.

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 28 of 39 PageID #: 28 120.

These disparities cannot be explained by a legitimate, non-discriminatory reason. BancorpSouth's underwriting policies and practices were not justified by a legitimate business need, and there were less discriminatory alternatives available to BancorpSouth than these policies and practices.

121.

BancorpSouth discriminated against applicants with respect to its underwriting of credit transactions on the basis ofrace in violation of ECOA, 15 U.S.C. § 169l(a)(l). 122.

BancorpSouth's practices constitute a pattern or practice of discrimination in violation ofECOA, 15 U.S.C. § 1691(a)(l).

123.

BancorpSouth' s pattern or practice of discrimination was intentional and willful and was implemented with reckless disregard for the rights of African-American applicants. Count3 (Pricing) 124.

Plaintiffs incorporate the allegations in Paragraphs 1 - 112 here by reference. 125.

BancorpSouth, through intent and/or effect of its pricing policies and procedures, charged African-American bo1rnwers higher prices for mortgage loans than similarly situated White borrowers. These pricing disparities were on the basis of race and were not based on legitimate loan or bo1rnwer characteristics.

126.

These disparities cannot be explained by a nondiscriminatory reason. BancorpSouth's pricing policies and practices were not justified by a legitimate business need, and there were less discriminatory alternatives available to BancorpSouth than these policies and practices.

127.

BancorpSouth's disc1iminated against applicants with respect to its pricing of credit transactions on the basis of race in violation ofECOA, 15 U.S.C. § 1691(a)(l).

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 29 of 39 PageID #: 29 128.

BancorpSouth's practices constitute a pattern or practice of discrimination in violation ofECOA, 15 U.S.C. § 1691(a)(l).

129.

BancorpSouth's pattern or practice of discrimination was intentional and willful and was implemented with reckless disregard for the rights of African-American borrowers. Count4 (Discriminatory Policy and Practice) 130.

Plaintiffs incorporate the allegations in Paragraphs 1- 112 here by reference. 131.

BancorpSouth instructed loan officers to deny applications from minorities and others whom BancorpSouth viewed as "protected class members" in 21 days and that "borderline" customers should be turned down quickly, while applications from other applicants were not subject to this shmter review period.

132.

BancorpSouth's policy and practice explicitly treated ce1tain mortgage loan applicants less favorably on the basis of their race, color, national origin, or other prohibited characteristics.

133.

BancorpSouth's policy and practice, as alleged herein, constitutes discrimination against applicants with respect to credit transactions on the basis of race, color, national origin, or other prohibited characteristics in violation ofECOA, 15 U.S.C. § 169l(a)(l). 134.

BancorpSouth's policy and practice constitutes a pattern or practice of discrimination in violation of ECOA, 15 U.S.C. § 169l(a)(l). 135.

BancorpSouth's pattern or practice of discrimination was intentional and willful and was implemented with reckless disregard for the rights of African-American borrowers and potential borrowers as well as borrowers and potential borrowers of other prohibited basis groups.

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 30 of 39 PageID #: 30 FAIR HOUSING ACT VIOLATIONS Count 1 (Redlining) 136.

The United States incorporates the allegations in Paragraphs 1-112 here by reference.

137.

BancorpSouth's policies and practices constitute the unlawful redlining of majority-minority communities in the Memphis MSA. BancorpSouth's policies and practices are intended to deny and discourage, or have the effect of denying or discouraging, an equal opportunity to the residents of majority-minority neighborhoods of the Memphis MSA to obtain m011gage loans, on account of the minority composition of those neighborhoods. These policies and practices are not justified by business necessity or legitimate business considerations. 138.

BancorpSouth's actions as alleged herein constitute: a.

Discrimination on the basis of race, color, or national origin in making available, or in the terms or conditions of residential real estate-related transactions, in violation of the FHA, 42 U.S.C. § 3605(a);

b.

The making unavailable or denial of dwellings to persons because of race, color, or national origin in violation of the FHA, 42 U.S.C. § 3604(a); and c.

Discrimination on the basis of race, color, or national origin in the tenns, conditions, or privileges or the provision of services or facilities in connection with the sale or rental of dwellings, in violation of the FHA, 42 U.S.C. § 3604(b). 139.

BancorpSouth's policies and practices as alleged herein constitute: a.

A pattern or practice of resistance to the full enjoyment of rights secured by the FHA; and

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 31 of 39 PageID #: 31 b.

A denial of rights granted by the FHA to a group of persons that raises an issue of general public impo11ance.

140.

BancorpSouth's pattern or practice of discrimination was intentional and willful and implemented with reckless disregard for the rights of African-American applicants and applicants of other protected classes.

Cotint 2 (Underwriting) 141.

The United States incorporates the allegations in Paragraphs 1-112 here by reference 142.

BancorpSouth, through intent and/or effect of its underwriting policies and procedures, denied mortgage loan applications of African-Americans more often than applications of similarly situated White applicants. These underwriting disparities were on the basis of race and were not based on legitimate loan or boITower characteristics. 143.

These disparities cannot be explained by a legitimate, non-discriminatory reason. BancorpSouth's underwriting policies and practices were not justified by a legitimate business need, and there were less discriminatory alternatives available to BancorpSouth than these policies and practices.

144.

BancorpSouth's actions as alleged herein constitute: a.

Discrimination on the basis of race in making available, or in the tenns or conditions of, residential real estate-related transactions, in violation of the FHA, 42 U.S.C. § 3605(a);

b.

The making unavailable or denial of dwellings to persons because of race in violation of the FHA, 42 U.S.C. § 3604(a); and

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 32 of 39 PageID #: 32 c.

Discrimination on the basis of race in the te1ms, conditions, or privileges, or the provision of services or facilities in connection with, the sale or rental of dwellings, in violation of the FHA, 42 U.S.C. § 3604(b).

145.

BancorpSouth's policies and practices as alleged herein constitute: a.

A pattern or practice of resistance to the full enjoyment of rights secured by the FHA; and b.

A denial of rights granted by the FHA to a group of persons that raises an issue of general public impo1iance.

146.

BancorpSouth's pattern or practice of disc1imination was intentional and willful and implemented with reckless disregard for the 1ights of African-American applicants. Count3 (Pricing) 147.

The United States incorporates the allegations in Paragraphs 1-112 here by reference.

148.

BancorpSouth, through its pricing policies and procedures, charged African- American borrowers higher prices for m01igage loans than similarly situated White bo1rnwers. These pricing disparities were on the basis of race and were not based on legitimate loan or borrower characteristics.

149.

These disparities cannot be explained by a legitimate, non-disctiminatory reason. BancorpSouth's pricing policies and practices were not justified by a legitimate business need, and there were less discriminatory alternatives available to BancorpSouth than these policies and practices.

150.

BancorpSouth' s actions as alleged herein constitute:

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 33 of 39 PageID #: 33 a.

Discrimination on the basis of race in making available, or in the te1ms or conditions of, residential real estate-related transactions, in violation of the FHA, 42 U.S.C. § 3605(a); and b.

Discrimination on the basis of race in the tem1s, conditions, or privileges, or the provision of services or facilities in connection with, the sale or rental of dwellings, in violation of the FHA, 42 U.S.C. § 3604(b).

151.

BancorpSouth's policies and practices as alleged herein constitute: a.

A pattern or practice of resistance to the full enjoyment of rights seemed by the FHA; and b.

A denial of rights granted by the FHA to a group of persons that raises an issue of general public impo1tance.

152.

BancorpSouth's pattern or practice of discrimination was intentional and willful and implemented with reckless disregard for the rights of African-American borrowers. Count4 (Discriminatory Policy and Practice) 153.

The United States incorporates the allegations in Paragraphs 1-112 here by reference.

154.

BancorpSouth instructed loan officers to deny applications from minorities and others whom BancorpSouth viewed as "protected class members" in 21 days and that "borderline" customers should be turned down quickly, while applications from other applicants were not subject to this shorter review period.

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 34 of 39 PageID #: 34 155.

BancorpSouth's policy and practice explicitly treated certain mortgage loan applicants less favorably on the basis of their race, color, national origin, or other protected characteristics.

156.

BancorpSouth' s actions as alleged herein constitute: a.

Discrimination on the basis of race, color, national origin, or other protected characteristics in making available, or in the tenns or conditions of, residential real estate-related transactions, in violation of the FHA, 42 U.S.C. § 3605(a); b.

Making unavailable or denial of dwellings to persons because of race, color, national origin, or other protected characteristics in violation of the FHA, 42 U.S.C. § 3604(a); and c.

Discrimination on the basis of race, color, national origin, or other protected characteristics in the terms, conditions, or privileges, or the provision of services or facilities in connection with, the sale or rental of dwellings, in violation of the FHA, 42 U.S.C. § 3604(b).

157.

BancorpSouth's policies and practices as alleged herein constitute: a.

A pattern or practice of resistance to the full enjoyment of rights secured by the FHA; and b.

A denial of rights granted by the FHA to a group of persons that raises an issue of general public imp01iance.

158.

BancorpSouth's pattern or practice of discrimination was intentional and willful and implemented with reckless disregard for the rights of African-American borrowers and potential bo1rnwers as well as bo1Towers and potential boITowers of other protected classes.

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 35 of 39 PageID #: 35 CONSUMER INJURY 159.

Persons who have been victims of Bancorp South's discriminato1y policies and practices are aggrieved persons as described in ECOA, 15 U.S.C. § 169le(i), and as defined in the FHA, 42 U.S.C. § 3602(i), and have suffered substantial injmy as a result of BancorpSouth's conduct in violation of the FHA and ECOA, as alleged herein. THIS COURT'S POWER TO GRANT RELIEF 160.

ECOA empowers this Court to grant such relief as may be appropriate, including actual and punitive damages and injunctive relief. 15 U.S.C. §§ 1691c(a)(9), 1691e(h). 161.

The FHA empowers this Com1 to grant legal or equitable relief necessary to ensure the full enjoyment of the rights granted by the FHA, including a temporary or pe1manent injunction, restraining order, and monetary damages to aggrieved persons. 42 U.S.C. § 3614(d). 162.

The CFPA empowers this Comt to grant any appropriate legal or equitable relief including, without limitation, a pennanent or temporary injunction, rescission or refo1mation of contracts, the refund of moneys paid, restitution, disgorgement or compensation for unjust enrichment, monetary relief, and civil money penalties, to prevent and remedy any violation of any provision of law enforced by the Bureau. 12 U.S.C. § 5565. PRAYER FOR RELIEF WHEREFORE, Plaintiffs pray that the Court enter an ORDER that: (1) Declares that the challenged acts, policies, and practices of BancorpSouth constitute violations of ECOA, 15 U.S.C. §§ 1691 -169lf, and the FHA, 42 U.S.C. §§ 3601-3619; (2) Enjoins BancorpSouth, its agents, employees, successors, and all others in active conce11 or participation with the Bank, from:

(a) Discriminating in any aspect of its mortgage lending business on the basis

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 36 of 39 PageID #: 36 ofrace, color, national origin, or any other basis prohibited by ECOA, 15 U.S.C. § 1691(a), or the FHA, 42 U.S.C. § 3605;

(b) Failing or refusing to take such affirmative steps as may be necessary to restore, as nearly as practicable, the victims of BancorpSouth's unlawful conduct to the position they would have been in but for the discriminatory conduct; and (c) Failing or refusing to take such affirmative steps as may be necessary to prevent the recurrence of any such discriminatory conduct in the future; to eliminate, to the extent practicable, the effect of BancorpSouth's unlawful practices; and to implement policies and procedures to ensure that all borrowers have an equal opportunity to seek and obtain loans on a non-discriminatory basis and with non-discriminatory terms and conditions; and (3) Awards equitable and monetary damages to all victims of BancorpSouth's discriminatory policies and practices for the injuries caused by BancorpSouth, including direct economic costs, consequential damages, and other damages, pursuant to 15 U.S.C. §§ 1691c(a)(9) and 1691e(h), 12 U.S.C. § 5565, and 42 U.S.C. § 3614(d)(l)(B); and (4) Assesses a civil money penalty against BancorpSouth in an amount authorized by 12 U.S.C. § 5565(c) and 42 U.S.C. § 3614(d)(l)(C) to vindicate the public interest; and (5) Awards such additional relief as the interests of justice may require. Dated: June 29, 2016

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 37 of 39 PageID #: 37 Respectfully submitted, Consumer Financial Protection Bureau: PATRICE ALEXANDER FICKLIN Fair Lending Director REBECCA J.K. GELFOND Deputy Fair Lending Director Ml~ PO~ Fair Lending Enforcement Attorney Email: [email protected] JEFFREY BLUMBERG Senior Fair Lending Enforcement Attorney Email: [email protected] JOSHUA ORENSTEIN Enforcement Attorney Email: [email protected] JESSE D. STEW ART Fair Lending Enforcement Attorney [email protected] Consumer Financial Protection Bureau 1700 G Street NW Washington, DC 20552 Tel: (202) 435-7866

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Case: 1:16-cv-00118-GHD-DAS Doc #: 1 Filed: 06/29/16 38 of 39 PagelD #: 38

United States of America:

LORETTA E. LYNCH Attorney General

-

FELICIA C. ADAMS, MSB # 1049 United States Attorney

Northern District of Mississippi 900 Jefferson Ave.

Oxford, MS 38655

Phone: (662) 234-3351

Fax: (662) 234-3318

VANITA GUPTA Principal Deputy Assistant Attorney Genera! Civil Rights Division

SAMEENA SHINA MAJEED Chief

Civil Rights Division

Housing and Civil Enforcement Section

Lon

TON M. SEWARD ~

PATRICIA L. O’BEIRNE Trial Attorney Patricia.O’ [email protected]

DC Bar # 437018 ONESHIA 8. HERRING ER

Trial Attorney [email protected] NC Bar # 41308

United States Department of Justice Civil Rights Division

Housing and Civil Enforcement Section 950 Pennsylvania Avenue, N.W.—~ NWB Washington, DC 20530

Phone: (202) 514-4733

Fax: (202) 514-1116

Document (June 2016)

PDF of this document (5 pages)

Page 83

Case: 1:16-cv-00118-MPM-DAS Doc #: 1-1 Filed: 06/29/16 1 of 1 PagelD #: 40

Exhibit A:

BancorpSouth Pre-January 2013 Assessment Area, Memphis MSA

Crittenden

f,

by

Marsh

— County Boundaries

CRA Assessment Area

2000 Census Tract Minority Population

MO Minority% >= 80% [7 50%<= Minority% < 80%

[|] 0%<= Minority % <50%

C

et “EF

Consumer Financial Protection Bureau

Page 84

Exhibit B:

BancorpSouth Pre-January 2013 Assessment Area and Branches, Memphis MSA ______________________________________________________________________________

2000 Census Tract Minority Population

County Boundaries CRA Assessment Area Minority% >= 80%

50%<= Minority% < 80%

0%<= Minority % <50% Branch Location Case: 1:16-cv-00118-MPM-DAS Doc #: 1-2 Filed: 06/29/16 1 of 1 PageID #: 41

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Exhibit C:

BancorpSouth Branch Locations during the Relevant Time Period, Memphis MSA ______________________________________________________________________________

2000 Census Tract Minority Population

County Boundaries Branch Location Minority% >= 80%

50%<= Minority% < 80%

0%<= Minority % <50% Case: 1:16-cv-00118-MPM-DAS Doc #: 1-3 Filed: 06/29/16 1 of 1 PageID #: 42

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Exhibit D:

BancorpSouth Branch Locations during the Relevant Time Period and Viable Branches, Memphis MSA ______________________________________________________________________________

2010 Census Tract Minority Population

County Boundaries Branch Location

Viable Branch Location Minority% >= 80%

50%<= Minority% < 80%

0%<= Minority % <50% Case: 1:16-cv-00118-MPM-DAS Doc #: 1-4 Filed: 06/29/16 1 of 1 PageID #: 43

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Case: 1:16-cv-00118-MPM-DAS Doc #: 1-5 Filed: 06/29/16 1 of 1 PagelD #: 44

Exhibit E:

BancorpSouth Application Volume, 2011 — 2013, Memphis MSA

County Boundaries

Applications ¢ 1

@ 10

@»

2010 Census Tract Minority Population

MO Minority% >= 80% [) 50% <= Minority% < 80% [_|0%<= Minority % <50%

GC

i] c PA Consumer Financial a r Protection Bureau