Albany, N.Y. — Two Upstate New York banks, including one with branches in Central New York, will pay over $600,000 to settle violations of the state’s fair lending law.
The banks’ lending practices resulted in minorities paying more for auto loans, according to the state Department of Financial Services.
Saratoga Springs-based Adirondack Trust Co. will pay $275,000 in penalties and Elmira-based Chemung Canal Trust Co. will pay $350,000.
Chemung Canal has branches in the Southern Tier, Finger Lakes and areas of Central New York, including Auburn and Cortland. Adirondack Trust has branches throughout the Capital Region.
The investigation focused on both banks’ auto lending businesses with car dealers. The dealers involved had some flexibility to set interest rates on the loans and the banks didn’t monitor them closely enough to ensure they were treating minority borrowers fairly, investigators said.
As a result, minorities ended up paying higher interest rates than whites. The differing interest rates were not based on borrowers’ credit histories or their risk of defaulting on their loans, the department said.
Investigators didn’t find any evidence the banks intentionally discriminated against anyone, but their policies caused minority borrowers to be treated unfairly.
Both banks cooperated with the department’s investigation.
In addition to the penalties, Chemung Canal agreed to pay restitution to borrowers. The bank will also monitor dealers it works with more closely to prevent discrimination in the future.
Adirondack Trust will also pay restitution and plans to make a $50,000 contribution to community development organizations. The bank has since discontinued the lending business the department was investigating.
The banks will post instructions on their websites on how borrowers can file restitution claims.