: ‘This is classic redlining’: A nonprofit ends its relationship with KeyBank over allegations of failing Black home buyers

“Mapping of KeyBank’s 2021 lending across several of the top markets reveals that it consistently avoids lending in Black neighborhoods,” the NCRC said. “This pattern stands in stark contrast to KeyBank’s public commitment to increase investment in underserved communities. This is classic redlining.”

Redlining, or illegally denying credit to people living in communities of color because of their race and ethnicity while disregarding creditworthiness, is the target of an initiative the Justice Department’s Civil Rights Division announced last year.

The Justice Department declined to comment on allegations made by the NCRC. The Consumer Financial Protection Bureau, which enforces the Equal Credit Opportunity Act to curtail discrimination in credit transactions and has taken action against redlining, also declined to comment on the allegations.

KeyBank, for its part, told MarketWatch that the Cleveland, Ohio-based institution “strongly disagrees” with NCRC’s characterization of its performance and lending activities. 

It was less than seven years ago that the National Community Reinvestment Coalition and KeyBank signed a community benefits agreement, a term used for the sorts of deals made between lending institutions or other private entities and representatives of the groups impacted by their business activities to ensure equitable treatment and positive local investment. 

KeyBank’s commitment, worth $16.5 billion in what NCRC described in a March 2016 announcement as the largest community benefits agreement made “by a single bank in recent history,” pledged to increase mortgage and small business lending in low- and moderate-income communities over a five-year period; invest in community development and lending; stop financing payday-loan activity, dole out millions of dollars of grants through its foundation, and more. 

Institutions like KeyBank don’t have to make these kinds of agreements, but may do so when community groups disapprove of a planned merger out of concern that it will be bad for locals, Jesse Van Tol, the president and CEO of NCRC, told MarketWatch. When the 2016 commitment was made, KeyBank was pursuing regulatory approval for an acquisition of the Buffalo, New York-based First Niagara Bank, and the agreement helped the bank achieve its goal, NCRC said.

Now, NCRC is saying that KeyBank may have used the agreement as leverage for its merger approval while otherwise failing Black Americans.

“NCRC staff and member organizations have recently poured months of work into talks with KeyBank in hopes of renewing, expanding and strengthening the Community Benefits Agreement KeyBank signed in 2016,” the nonprofit said in a statement Thursday. “But after discovering that KeyBank
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had abandoned the commitments it made to NCRC members six years ago — and then used the profits from its merger with First Niagara to pay out huge dividends to insiders while largely abandoning Black and low-income communities in its service areas — NCRC concluded the bank could not be trusted to follow through on any new promises it makes to better serve marginalized communities.”

Not only did NCRC think that, several years later, KeyBank had not met the terms of the agreement, but NCRC also believed that KeyBank had made an announcement in 2021 about expanding the agreement that was “actually a reduction in their lending activities,” Van Tol said. 

In the years since the original agreement, the share of KeyBank loans going to Black and low- and moderate-income homebuyers has dropped, the bank has allegedly “limited its home mortgage lending in census tracts where Black residents are clustered,” and it’s approved loans for low-income white mortgage applicants at a higher rate than upper-income Black applicants, NCRC alleged in its report.

And last year, when KeyBank was publicly saying it had already exceeded the first community benefits agreement plan ahead of schedule, 2.2% of its 46,971 home mortgage originations included a Black applicant, compared to other major lenders that had shares of loans to Black borrowers ranging from 2.9% to 20.8%, the NCRC said. 

“We looked at the top 50 mortgage lenders in the country, banks and non-banks, and KeyBank was bottom of the pack — worst in terms of percentage of their loans going to people of color,” Van Tol, who also resigned from the bank’s national advisory committee, told MarketWatch. “Some of those banks will then say, ‘We’re in the Midwest, we’re not in a lot of markets where there’s a lot of Black people or people of color, except KeyBank is in Philadelphia, Buffalo, Cleveland, other places with significant minority populations.”  

A spokesperson for KeyBank, meanwhile, told MarketWatch in a lengthy statement that the bank increased loans to Black borrowers by 24% from 2018 to 2021 and “more than doubled its lending to all minority groups during this same time period.” 

The bank’s percentage of Home Mortgage Disclosure Act-reportable loans to low- and moderate- income borrowers also “outpaced national lending averages as a whole, which ranged from 19% and 22%,” the spokesperson said. (The bank’s total lending to these borrowers has grown “significantly and consistently,” though the proportion of loans relative to other buyers has remained “relatively consistent” at 23% to 25%, the spokesperson said.) 

The spokesperson said the bank has additionally committed $25 million to increase mortgage lending in majority-minority neighborhoods; launched a special purpose credit program in September to offer a $2,500 credit to eligible homebuyers, which is set to increase to $5,000 next month; and said it also supports minority depository institutions, including through a “commitment to place over $50 million in deposits, technical assistance, and partnerships with individual MDIs.”

Special credit purpose programs are increasingly popular with financial institutions, and the Consumer Financial Protection Bureau, along with other federal agencies, has urged lenders to consider them as an opportunity to increase credit access to historically disadvantaged applicants. 

“KeyBank does not discriminate and does not lend based on race,” the spokesperson said. “KeyBank’s lending decisions are applied consistently to all potential borrowers and are based on predetermined criteria in accordance with fair lending laws. Any decision to deny an applicant is based solely on the financial information and data associated with the applicant. To comply with fair lending laws, KeyBank has processes in place to review lending decisions and check that our practices are not discriminatory to individuals or to groups of people.”