Hartford Business Journal

www.HartfordBusiness.com • August 19, 2019 • Hartford Business Journal 15 The lawsuit also said the bank stra- tegically positioned branch offices and mortgage loan offices in areas of ma- jority-white neighborhoods and have treated prospective loan applicants differently based on race or ethnicity. Leonard Suzio, president of GeoData- Vision, a Wallingford adviser helping banks comply with their CRA obliga- tions, said he got calls from nearly two dozen Connecticut banks days after CFHC and National Consumer Law Center filed their suit. They worried, Suzio said, about tight- ened lending and reporting rules and other potential fallout from the lawsuit. But Suzio labeled as "gross exagger- ations" Kemple's assertion that nearly all Connecticut home-loan lenders are out of compliance with state-federal lending rules. He added that banks rarely flout anti-discrimination rules in mortgage lending. "I've never seen a situation where there's explicit discrimination going on,'' said Suzio, a former GOP member of the state Senate. "Usually, it's a failure of pro- cedures to ensure this doesn't happen.'' Despite that, Suzio also points to what he sees as a new front challenging banks' efforts to win public and regula- tory approval to expand their operations through mergers and acquisitions. Since the adoption of the Community Reinvestment Act of 1977, banks have been prodded by policymakers and regulators to adopt policies that engage and benefit low-income and minority bank customers in their markets. They range from deci- sions on where to open, or shut branches; prod- ucts and services, such as low-fee or no-fee checking/ savings accounts; and financial-lit- eracy training for needy or minority borrowers. Following the 2008 near global financial meltdown, triggered partly by the U.S. subprime- mortgage lending fiasco, and sub- sequent Great Recession, Congress beefed up regulatory oversight of banks and other lenders through tightened regulations that also spawned the Consumer Financial Protection Bureau. The federal agency, which has been in the crosshairs of the Trump adminis- tration, is tasked with ensuring compli- ance by lenders and other regulated financial entities, and to being watchful for new or potential threats to consum- ers' financial safety. One outgrowth of the tightened oversight is that banks now must report in much greater detail data such as the racial/ ethnic makeup of consumer- and mortgage-loan applicants; clearer, more reasonable explanations for denying loans to all borrowers; and filing their comparative ratios of loan-rejection rates for minority and low-income borrowers against their historical rejection-approval rates and those of their peer lenders. Suzio said the banking commu- nity is awaiting the release of re- vised 2018 Home Mortgage Dis- closure Act data tracking lenders' loan approval/ rejection rates. The original data set was delayed, Suzio said, due to a higher er- ror rate from banks struggling to comply and report accurate information. The full 2018 lending report is expected in September, he said. Mounting activism But where regulators tend to be dis- passionate participants in the review- approval process, Suzio said, activist individuals and organizations, acting on the public's behalf, sometimes wield sway on decisions in which the benefits to the public are paramount. However, the formal banking data that regulators and activists use to decide who's compliant or not is some- times either incomplete, outdated or misinterpreted. He recalled that former Manches- ter Savings and former New Haven Savings ran afoul of local activists who claimed data showed each had not done their best to serve the needs of low-income and minority home- buyers in their markets. Yet, Suzio said, when his firm looked closer, it found that data for each had been improperly com- pared to data that either was incon- sistent or irrel- evant. The result was, he said, both institutions were not the bad actors they were portrayed to be. Still, with the meter running to close their merger, Manchester Sav- ings and New Haven Savings agreed to fork over $30 million to settle the activists' legal action. One outcome is that New Haven got a community-devel- opment bank from the settlement. The new data mandated under the Consumer Financial Protection Act will likely paint a more nuanced por- trait of Connecticut and U.S. lenders' compliance efforts, Suzio said. "Everybody's waiting for that to come out,'' he said. "There's so much more detailed information available." Tips for monitoring fair lending Len Suzio, president of Geo- DataVision, an adviser to banks on meeting their Community Re- investment Act obligations, offers these tips to mortgage lenders for monitoring compliance on their own loan desks: • Conduct a follow-up review of all denied loan applications, looking for missing or incom- plete information or data. This affords an opportunity to verify the reasons for the rejection, or to correct borrowers' deficiencies, to give them another shot. • Perform annual independent reviews of lenders' fair-lending practices versus their peers. This data-driven exercise can spot- light problems or other potential underwriting issues. • Re-examine the mortgage-re- jection "outliers'' and measure the reasons for denial against lenders' norm. For instance, one applicant may be denied a loan because of a low credit score, while another with a similar low score may get credit because of a good record of repaying rent, utilities or other non-credit repayments. — Gregory Seay Leonard Suzio, President, GeoDataVision SBT and Liberty execute a confidentiality agreement and an exclusivity agreement. Both parties subsequently begin their due diligence. Oct. 4, 2018: The Connecticut Fair Housing Cen- ter Inc. and the National Consumer Law Center file a lawsuit against Liberty alleging that Liberty had violated the Fair Housing Act. Both parties immediately table their merger talks. From Oct. 19, 2018 to March 14, 2019: The parties entered into several extensions of the exclusivity agreement, while Liberty works to settle the discrimination suit. Jan. 10, 2019: HBJ reports, with Liberty's confirmation, that Chandler Howard delayed his scheduled yearend 2018 retirement while the lender continued searching for his successor. The mortgage lawsuit and pending merger talks now appear to be why Howard stayed at the bank beyond his retirement date. Feb. 28, 2019: Liberty and CFHC reach a settlement. March 4, 2019: Both jointly announce their settlement. March 7, 2019: Liberty introduces former TD Bank executive David W. Glidden as its new CEO, effective March 18. March 14, 2019: SBT's board meets with its financial and legal advisers to discuss reviving its merger talks with Liberty. March 20, 2019: SBT's board and advisers huddle again, with Piper Jaffray declaring its opinion that the merger consideration is fair to SBT stockholders. March 21, 2019: SBT and Liberty jointly an- nounce plans for a $71 million merger for completion in Oct. 2019. July 26, 2019: State Banking Department approves the SBT-Liberty merger. Liberty sued over debit- overdraft fees By Gregory Seay gseay@hartfordbusiness.com A Marlborough checking- account customer is suing Liberty Bank, claiming the Middletown lender's policy on debit overdrafts is usurious. Mary Quirk, who is seeking class- action status in Connecticut federal court on behalf of other allegedly aggrieved Liberty depositors, claims Liberty socked her with more than $2,000 in overdraft fees on her debit- checking account in just 2018 alone. Her suit was filed July 12, two months after Liberty, a $7 billion- asset mutual bank owned by its de- positors, announced it will acquire smaller Simsbury Bank & Trust Co. for $71 million. The merger is set to close in October. Quirk's suit claims that Liberty adheres to its policy of dinging cus- tomers' accounts with a $33 over- draft fee even when depositors have enough in their "available balances'' in their accounts to cover the debit. In her 19-page lawsuit, Quirk de- scribed how Liberty's transaction- settlement process is supposed to work: Once debit trans- actions are cleared on an account with sufficient funds, Liberty immediately reduces depos- itors' checking accounts for the sum, sets aside, or places "holds'' on funds to cover the amounts, and flags the ac- count with an "available balance'' to show the subtracted amount. "As a result,'' the suit states, "cus- tomers' accounts will always have sufficient available funds to cover these transactions because Lib- erty has already sequestered these funds for payment.'' But multiple debits and deposits on a checking account can cause customers' account balances to fluctuate, sometimes with accounts momentarily showing a "negative balance'' before debit transactions can be fully settled. When that happens, Quirk claims, Liberty imposes the debit overdraft fee regardless of whether the account ultimately held enough funds to cover the transaction. In a statement, Liberty CEO David W. Glidden said that the bank does not comment on pending litigation, adding that it "takes this and all al- legations very seriously and we are dedicated to treating our customers with the utmost respect." David W. Glidden, CEO, Liberty Bank

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