AIG units settle lending discrimination allegations

By Bloomberg News
Friday, March 5, 2010

AIG Federal Savings Bank and Wilmington Finance settled Justice Department claims that they broke the law by allowing wholesale mortgage brokers to charge higher direct broker fees to black borrowers.

In a consent order filed Thursday in federal court in Wilmington, Del., the banks -- both units of New York-based American International Group -- agreed to pay at least $6.1 million to resolve the allegations.

The case is part of a crackdown on discriminatory lending, and marks the first time the Justice Department has held lenders responsible for alleged discriminatory activities of affiliated brokers, said Thomas Perez, assistant attorney general in charge of the department's civil rights division. The department has 45 open investigations involving lending discrimination, he said Thursday at a news conference in Washington.

AIG Federal and Wilmington Finance deny the allegations, according to the settlement, which requires court approval.

"We are pleased to have reached an agreement with the government to resolve the issues in the complaint, as well as to avoid the distractions and burdens of protracted litigation over contentious issues," AIG spokesman Mark Herr said in a statement.

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