(NewsNation) — Washington Trust, the oldest community bank in the nation, will pay $9 million to settle allegations that it engaged in pattern of discriminatory lending by “redlining” Black and Hispanic neighborhoods, the Department of Justice announced. 

Redlining involves the unfair denial or limitation of financial services to residents of certain neighborhoods, often based on racial or ethnic factors.  

Despite its expansion efforts throughout Rhode Island between 2016 and 2021, Washington Trust is accused of not establishing any branches in neighborhoods where most residents were Black or Hispanic, according to the news release.

“Washington Trust vehemently denies the allegations and entered into this agreement solely to avoid the expense and distraction of potential litigation, and to allow the Bank to focus fully on serving the needs of its customers and communities,” the bank said in a statement. 

U.S. homeownership rate reached 65.5%, but the rate for Black Americans significantly trailed behind at 44%, according to a 2023 report by the National Association of Realtors. That same report found that homeownership among Black Americans grew only 0.4% over the past decade, resulting in a substantial 29 percentage point gap compared with white Americans. This marks the most significant Black-White homeownership rate disparity in a decade.

The complaint alleges that Washington Trust primarily relied on mortgage loan officers stationed in predominantly white areas to drive their loan application process. It also claims the bank failed to adequately train or motivate its lending staff and did not engage in outreach, marketing, or advertising campaigns targeting mortgage services to compensate for their absence in majority Black and Hispanic neighborhoods. 

Over the same six-year period, the complaint asserts that other banks in Rhode Island received nearly four times the number of loan applications each year in these predominantly Black and Hispanic neighborhoods compared to Washington Trust. Even when Washington Trust did receive loan applications from these areas, prosecutors say the applicants were disproportionately white. 

“This settlement should send a strong message to banks regarding the Justice Department’s firm commitment to combat modern-day redlining and ensure that all lenders are providing equal access to home loan opportunities to communities of color,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. 

Under the proposed consent order, the community bank will pay out $7 million in mortgage loan subsidies over the next five years. These subsidies will go toward mortgage loans, home improvement loans, or refinancing loans and will be channeled toward specific census tracts in Rhode Island.  

The bank also earmarked $2 million for concentrated community outreach, partnerships and marketing initiatives. The bank will also open two new branches in majority-Black and Hispanic neighborhoods in Rhode Island; and ensure at least two mortgage loan officers are dedicated to serving these neighborhoods.