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Feds say this Minnesota bank doesn't serve people who live in minority neighborhoods

It's called redlining, and it's illegal.

A Minnesota bank is being sued by the Department of Justice for discriminating against minorities.

In a lawsuit filed Friday, the Department of Justice says Chaska-based KleinBank denied or avoided providing its mortgage-lending services to people who live in neighborhoods where the majority of residents are minorities.

The lawsuit says KleinBank made loans in minority neighborhoods four times less than the rate of comparable lenders.

Federal officials allege KleinBank excluded minority neighborhoods from its service area; it's branches and mortgage loan officers were located in white neighborhoods, but not in minority ones; and it targeted its marketing and advertising toward residents who live in white neighborhoods.

This is called "redlining" and it's a violation of the Fair Housing Act and Equal Credit Opportunity Act, a news release says.

“Redlining produces an unequal and unlevel playing field for borrowers in minority neighborhoods,” Principal Deputy Assistant Attorney General Vanita Gupta, head of the Civil Rights Division, said in the release. “Cases like this one demonstrate the Justice Department’s strong commitment to hold banks accountable for continuing and perpetuating historic trends of inequality in residential mortgage lending.”

GoMN has reached out to KleinBank for comment, but it is closed Monday for the Martin Luther King Jr. federal holiday.

KleinBank opened in Minnesota in 1907, and now has 21 branches and 400-plus employees, with assets totaling $1.8 billion, the bank's website says. The bank lists several awards, including ethics awards, being the best mortgage company and best bank.

Redlining

Redlining became a common practice after it was introduced back in 1934. The Home Owner's Loan Corporation drafted maps of communities to show which areas were worthy of getting loans. They were ranked and color-coded, with minority neighborhoods typically getting rated a D or "hazardous" and were outlined in red, NPR said

The program was celebrated for guaranteeing loans for white people, but refused to back loans for black people or people who lived near in predominately black neighborhoods, The Atlantic reported.

The practice of redlining spread throughout the mortgage industry, and lasted until 1968 when the Fair Housing Act was introduced. Redlining created the neighborhoods we live in today, and you can see it all on this interactive map, which includes Minneapolis and Duluth. It shows the redlined neighborhoods and includes information on why the neighborhoods got each ranking.

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