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FinalCall.com News
Business & Money
Carolina bank accused of charging Blacks higher rates
By Cash Michaels
The Wilmington Journal
Updated Aug 22, 2004 - 7:53:00 PM
WILMINGTON, NC (NNPA)- Central Carolina Bank (CCB), where Wilmington Mayor Spence Broadhurst is a North Carolina CEO, is accused of using a “tiered pricing system,” charging Blacks higher interest rates for mortgage loans.
That’s just one of the reasons why two Durham-based public interest groups—the Community Reinvestment Association of North Carolina (CRANC) and the NC Fair Housing Center (NCFHC)—are actively opposing the merger of CCB with SunTrust Banks Inc. of Atlanta.
Regulators with the Federal Reserve—the federal agency that oversees the U.S. banking industry and considers all merger applications—are considering SunTrust’s $6.98 billion cash-and-stock bid to purchase the National Commerce Financial Corp, CCB’s Memphis, Tenn. parent company. Final approval of the deal is expected by the end of the year.
If the merger is approved, SunTrust—which operates in Florida, Georgia, Maryland, Tennessee, Virginia and the District of Columbia—would acquire 256 CCB branches in North and South Carolina, becoming the seventh largest bank in the nation with over $148.2 billion in assets and $97 billion in deposits. Citigroup, Inc., according to SNL Financial, is the nation’s largest bank with almost $1,318 trillion in assets.
Watchdog groups like CRANC and NCFHC insist that a SunTrust/CCB merger would reap big benefits for everyone but Blacks. They have filed opposition comments with federal regulators, not only challenging CCB’s business practices as discriminatory, but adding that the bank has done little quality investment in communities of color.
That opposition arose after CRANC and NCFHC representatives met with SunTrust-CCB executives, and failed to get any firm commitments from them to improve lending practices in Black, Hispanic and poor communities.
CRANC and NCFHC were also concerned that executives with CCB and its parent company, National Commerce, would stand to pocket $17 million in cash and stock bonuses once the merger is a done deal.
In an ad run in several Black newspapers across the state several weeks ago, CRANC and NCFHC further specifically alleged CCB, in violation of fair lending laws, “charges a higher interest rate for loans under $75,000,” thus having a “discriminatory impact on African Americans, who disproportionately apply for loans under $75,000.”
The ad, which was in the form of a letter concerned citizens would sign, cut out and then send to federal regulators, also alleged that CCB has a “culture of exclusion… does not have a minority vendor participation program, has local advisory boards that are overwhelmingly white and male, and has no minority representation in its upper management.”
The letter concludes, “SunTrust Bank has refused to make public commitments to address these concerns in its acquisition of CCB. We urge the Federal Reserve to place conditions on the merger to address Community Reinvestment Act and Fair Lending concerns.”
Those “conditions” regarding the Community Reinvestment Act (CRA) are in reference to the 1977 law passed by Congress requiring banks, thrifts and other lenders to “make capital available in low and moderate income urban neighborhoods.” The goal was to stop banks from refusing to make loans to Blacks, Hispanics and others, and stabilize the small businesses and infrastructure of communities of color, thus allowing them to grow and improve.
The CRA is usually enforced during the merger process involving two financial institutions, or expansion. Regulators periodically review banking compliance with the CRA, issuing one of four ratings: Outstanding, Satisfactory, Needs to Improve or Substantial Non-Compliance.
During the regulatory consideration of a bank merger, the CRA requires that a financial institution’s record of lending in communities of color be reviewed, and that the public be given a period of time to make written comment on the application. Regulators may ask the banks to respond to specific questions regarding their compliance with CRA. Those answers would become public record.
In the case of SunTrust-CCB, that time expired on July 19 and all is in the hands of the federal regulators, who are likely to approve the merger by the end of the year. But the goal of CRANC and NCFHC, according to Tonya Wolfram of CRANC, is not to stop the merger, but making sure that communities of color get their fair share out of it. In addition, CRANC/NCFHC wants local community development with local partnerships with local groups.
Ms. Wolfram says CCB, founded at first in 1903 as Durham Loan & Trust Co., then established as Central Carolina Bank in 1961, wasn’t “always this bad,” citing that the company did more for its Black customers before it merged with National Commerce in 2000.
Regarding SunTrust and its record, she says even though it hasn’t operated in North Carolina before, there is evidence of a lack of diversity on the management level. She adds that SunTrust also has a “high declination” rate when it comes to mortgage loans to Blacks, and does very little business with vendors of color.
“We asked them in a meeting, ‘Are you willing to set goals for minority vendor participation?’ and [SunTrust] flatly came out and said no. They said ‘Trust us, you’ll be able to know by our performance.’ Frankly, that did not impress us,” she stressed.
However, in published reports, Eileen Sarro, spokesperson for CCB parent company National Commerce Financial Corp., counters that the charges are “without merit,” noting that both CCB and SunTrust have received “outstanding” CRA ratings.
“Some issues are outstanding, but we feel that we have a great reputation and are good corporate citizens. Any implication that we engage in any discriminatory lending is totally without merit. Are there areas to improve? Of course, and we are working with them,” she said.
There’s nothing wrong with so-called “tiered pricing,” she continued, stating that it is a widely used practice in the banking industry nationwide and is approved by HUD (the U.S. Department of Housing and Urban Development).
