Two subsidiaries of American International Group Inc. have agreed to pay $7.1 million to settle discrimination allegations of charging higher fees to African American borrowers.
According to the statement released by the Justice Department on Thursday (March 3), 2,500 African American borrowers of subprime loans will receive a total of $6.1 million after being charged higher broker fees.
Those unfamiliar with a subprime loan, it is the loan that is extended to borrowers who’s credit rating is considered to be below standards or “poor.”
Thomas E. Perez, , the assistant attorney general in charge of the Justice Department’s civil rights division, told the Associated Press, the action “is a warning shot” to lenders who fail to monitor brokers’ conduct.
AIG is at the center of many of the nation’s economic woes.
The settlement was decided after allegations were made that AIG Federal Savings Bank and Wilmington Finance Inc. engaged in a pattern or practice of discrimination under the federal Fair Housing and Equal Credit Opportunity Acts.
The case marks the first time a lender has been held responsible for failing to ensure brokers do not charge higher fees because of race, Perez said in a briefing for reporters.
In addition to the settlement, the AIG subsidiaries will invest at least $1 million in consumer education.