Stroudsburg-based ESSA Bank & Trust will pay $3 million over allegations that it discriminated against Black and Hispanic neighborhoods around Philadelphia.

United States Attorney Jacqueline C. Romero announced that the U.S. Department of Justice’s Civil Rights Division and the U.S. Attorney’s Office for the Eastern District of Pennsylvania filed a proposed consent order to resolve allegations that the company engaged in a pattern or practice of lending discrimination by “redlining” majority-Black and Hispanic neighborhoods around Philadelphia.

“Redlining” is an illegal practice in which lenders avoid providing credit services to individuals living in communities of color because of the race, color or national origin of residents there. The Fair Housing Act and the Equal Credit Opportunity Act prohibit financial institutions from discriminating on such bases when providing mortgage lending services.

The department began investigating ESSA’s lending practices after receiving a Federal Deposit Insurance Corp. referral. ESSA fully cooperated with the investigation.

The complaint alleges that from at least 2017 to 2021, ESSA failed to provide mortgage lending services to (and did not serve the credit needs of) majority-Black and Hispanic neighborhoods in and around Philadelphia; inadequately staffed loan officers to cover the bank’s branches in those neighborhoods; and lending advertising targeted majority-white areas while avoiding Philadelphia County.

“This settlement reflects our business decision to avoid the costs, uncertainties and distractions of litigation,” said Gary S. Olson, president and CEO of ESSA.

Olson observed that “during the time period covered by the government’s complaint, ESSA did not receive a single fair lending complaint from any customer or potential customer,” noting further that in 2018 (within the time covered by the government’s Complaint), ESSA opened a branch and business center in downtown Allentown, in a majority minority census tract.

Under the consent order, ESSA agrees to invest more than $3 million to increase credit opportunities in majority-Black and Hispanic neighborhoods in the bank’s lending area.

ESSA will provide a $2.92 million in a loan subsidy fund to increase access to home mortgage, home improvement, home refinance, and home equity loans and lines of credit; $125,000 on community partnerships to provide services that increase residential mortgage credit access within a five-mile radius of the Upper Darby and Lansdowne branches; and $250,000 on advertising, outreach, consumer financial education, and credit counseling to expand the Bank’s services within that radius.

ESSA also agrees: to assess and report on its fair lending program; to train staff on the Bank’s obligations under the consent order; to complete a community credit needs assessment and remedial plan; to maintain a Fair Lending Committee and a Community Development Officer; and to hire two new mortgage loan officers to serve its Upper Darby and Lansdowne branches.

The consent order is subject to court approval.

The bank has branches in Brodheadsville and throughout Monroe County and the Lehigh Valley.