The Department of Housing and Urban Development is investigating whether HSBC’s U.S. unit engaged in redlining majority-Black and -Hispanic neighborhoods in six metropolitan areas between 2018 and 2021, the bank disclosed in a filing Tuesday.
The review stems from a complaint filed this year by the National Community Reinvestment Coalition, which identified the areas as New York City, Los Angeles, San Francisco, Oakland, Seattle and Orange County, California.
"Lending redlining is a violation of the Fair Housing Act," Alan Pyke, an NCRC spokesperson, told American Banker.
An HSBC spokesperson declined to comment to the publication. HUD did not respond to a request for comment.
It is likely that the branches involved are no longer under HSBC. The bank greatly reduced its U.S. footprint in 2021 — selling 10 West Coast locations to Los Angeles-based Cathay Bank, and transferring 80 mostly East Coast branches to Citizens Bank. HSBC said at the time it planned to repurpose 20 to 25 locations as international wealth centers, and close the remaining 35 to 40.
Nonetheless, the Justice Department, Office of the Comptroller of the Currency and Consumer Financial Protection Bureau have ramped up their focus on perceived lending discrimination, reaching seven settlements over redlining allegations since 2021.
The investigation disclosed Tuesday wouldn’t mark the first time HSBC has landed in hot water over its mortgage lending policies. The bank, in February 2016, agreed to pay $470 million to HUD, the CFPB, and the attorneys general of 49 states and the District of Columbia over violations in mortgage origination, servicing and foreclosure. The Federal Reserve, at the same time, handed down a $131 million penalty of its own.
Pyke said the NCRC aims to "pursue any remedies” federal investigators “deem appropriate.”