Source: United States Attorneys General
Note: View the complaint here and the consent order here.
The Justice Department announced today that SouthEast Bank agreed to pay $1.5 million to resolve allegations that it engaged in a pattern or practice of lending discrimination by disproportionately discouraging and denying Black and American Indian/Alaska Native (AI/AN) graduates seeking to refinance their student loans.
“Everyone in our country should have a fair chance and equal opportunity to refinance a school loan. By rejecting graduates based on where they obtained their degree, SouthEast Bank’s policy denied and discouraged Black, American Indian and Alaska Native graduates seeking to refinance student loans for reasons that were wholly unrelated to their personal merit or ability to repay their loans,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “This is a reminder of how historic inequities in lending and refinance opportunities for Black and American Indian/Alaska Native students persist today, and why combating these inequities is an essential part of the Justice Department’s work.”
The complaint, which was filed on Jan. 18, in the Eastern District of Tennessee, alleges that, between December 2015 and April 2021, the refinance program’s eligibility criteria automatically denied graduates of schools with school-based default rates above thresholds SouthEast established. Under this policy, for example, Black bachelor’s degree recipients were as much as 4.3 times more likely to be excluded than bachelor’s degree recipients who were not Black. Similarly, AI/AN Bachelor’s degree recipients were as much as 3 times more likely to be excluded than bachelor’s degree recipients who were not AI/AN. The department’s complaint further alleges that SouthEast’s policy disproportionately excluded graduates of as many as 84.4% of majority-Black schools, including Historically Black Colleges and Universities, but no more than 21.1% of colleges and universities whose student bodies were not majority-Black.
The consent order, which is subject to court approval, requires SouthEast Bank to spend a total of $1.5 million to:
- Compensate applicants who were denied the ability to refinance their student loans by the policy;
- Increase access to student loan refinancing for qualified graduates of schools that were previously excluded under the policy; and
- Provide consumer financial education to students and graduates of those previously excluded schools.
The department’s investigation into SouthEast’s student loan refinancing program originated from a referral by the Federal Deposit Insurance Corporation. SouthEast cooperated with the investigation and worked with the Justice Department to resolve the allegations.
Additional information about the Civil Rights Division’s work to uphold and protect civil and constitutional rights is available at justice.gov/crt. Complaints about discriminatory practices may be reported to the Civil Rights Division through its internet reporting portal at civilrights.justice.gov.