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Fair lending group sues Old National as bank pursues M&A deal


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Fair lending group sues Old National as bank pursues M&A deal

The Fair Housing Center of Central Indiana filed a lawsuit in federal court against Old National Bancorp subsidiary Old National Bank, alleging it engaged in discriminatory practices in residential mortgage lending to people of color in the Indianapolis region.

The lawsuit was filed Oct. 6 in the U.S. District Court for the Southern District of Indiana, Indianapolis Division. It states that the bank has structured its business to avoid providing access to mortgage credit to Black residents and neighborhoods in the Indianapolis area and to discourage Black residents from seeking mortgage credit.

"Old National deliberately seeks to limit its residential lending business to predominantly white areas and customers and maintains policies and practices that have the effect of doing so," the lawsuit states.

According to the lawsuit, 2 million people reside in the Indianapolis metropolitan statistical area, 305,000 of whom are Black. Old National made 2,250 mortgage loans in the two-year period from 2019 to 2020. The borrower's race was identified in over 91% of those loans, "yet … only thirty-seven were to Black borrowers across the entire Indianapolis MSA," the lawsuit said.

The bank is in the process of an all-stock merger of equals with Chicago-based First Midwest Bancorp Inc. The companies are currently waiting for the Federal Reserve's decision on their application.

The FHCCI was one of several organizations that signed on to a July National Community Reinvestment Coalition letter sent to the Office of the Comptroller of the Currency and the St. Louis Fed requesting that the agencies conduct hearings as part of the merger review process "to provide community members an opportunity to offer feedback on a strategy for increasing Old National Bank’s lending to people of color as well as borrowers with low and moderate incomes."

After the OCC approved the merger on Aug. 23, the FHCCI met virtually with Fed staffers, but "they made clear during the meeting that we could not discuss our concerns without Old National Bank being present," FHCCI Executive Director Amy Nelson told S&P Global Market Intelligence via email.

The advocacy group then contacted Old National about a joint meeting with the Fed, but the bank never responded, Nelson said. The central bank and Old National did meet with FHCCI on Oct. 7 to see if the advocacy group could provide the Fed with additional information to supplement its comments.

"Given the many issues we outlined in our lawsuit, we have serious concerns about any additional mergers which would further expand Old National's presence, and potentially, lead to an expansion of violations of fair housing laws," Nelson said. "We want Old National Bank to step up and take corrective action to ensure fair lending."

Old National said in an email that it "strongly and categorically denies" the allegations made by the Fair Housing Center of Central Indiana.

"Old National is committed to engaging in fair and equal lending practices," the email said. "Because this is now the subject of pending litigation, we are unable to comment further at this time."

The Fed declined to comment on the matter.