Bank of America to pay $335 million for racial loan discrimination

Bank of America yesterday agreed to pay a record $335 million to settle US Justice Department (DoJ) allegations that its Countrywide Financial unit discriminated against black and Hispanic borrowers during the housing boom

The settlement is the largest residential fair-lending settlement in the US history, after insurance giant AIG's two subsidiaries paid $6.1 million in March 2010 to settle similar compalaints.

At the core of the allegations in the complaint is simple - African-Americans or Hispanics who qualified for a loan were likely to have paid more to Countrywide for the loan simply because of the colour of their skin. 

According to the allegation, these borrowers are likely to have paid more than a similarly-qualified white borrower.    

And, African-American and Hispanic borrowers were far more likely to have been steered into an expensive and risky subprime loan than a similarly-qualified white borrower. 

The DoJ alleges that more than 200,000 African-Americans and Hispanics were victims of this racial bias that led to their being charged higher prices or steered into more risky products because of the colour of their skin rather than their creditworthiness.