Santander Bank under fire after Reinvestment Act downgrade

Communities of color are objecting to Santander Bank’s use of a Washington D.C.-based community development group to help negotiate a new community benefits agreement for Boston, after the bank failed to meet certain capital obligations to low income communities where it does business.

The Office of the Comptroller of the Currency (OCC) in February downgraded Santander’ Bank’s Community Reinvestment Act (CRA) rating to “needs to improve.”

“It is deeply troubling that Santander Bank failed to meet its CRA obligations, specifically here in Boston, where we have done so much to advocate for equal access and opportunity,” said Tanisha Sullivan, president of the Boston NAACP in a joint statement with other civil liberties groups.

Though measures of lending, investment, and service would ordinarily have rated an overall “satisfactory” rating, the OCC decided to lower the CRA rating further based on several deceptive or unfair billing practices, non-compliance related to motor vehicle loans, and deceptive overdraft practices.

Santander has taken steps to correct its failings, the OCC report stated, though the illegality did merit a downgrade.

“It is noted that bank management has been cooperative and taken the initiative to correct these supervisory issues efficiently and timely,” the report read. “The bank’s vendor management programs have shown significant improvements in an effort to prevent recurrence of violations.”

The bank serves a number of states in the Northeast region and is headquartered in Boston.

Eleven US senators from the impacted states, including Sen. Elizabeth Warren and Sen. Ed Markey, sent a letter on March 2 to Comptroller Thomas J. Curry concerning Santander’s CRA commitments.

“While we are pleased that the OCC’s examination considered recent enforcement actions against the bank for illegal overdraft fees and unlawful repossessions of cars from military service members,” they wrote, “it is imperative that the OCC also take into account findings which suggest discriminatory lending practices.”

They noted a report by the Committee for Better Banks (CBB), analyzing Santander’s 2014-2015 performance, which concluded: “Santander struggled to meet its lending requirements to low-income and communities of color in ten metropolitan areas.”

Its loan denial rates overall for communities of color in 2015 were 0.5 percent above the industry average, according to that report. Denial for low-income communities were 19.6 percent, compared with the industry average of 15.9 percent.

The bank reaffirmed its commitment to the communities it serves in a statement to the Reporter on Tuesday. Due to the time involved in conducting a full review, the data used in the OCC report pulls from 2011 to 2013, which Santander officials say is not reflective of their current levels of investment.

“Our CRA rating downgrade relates to the 2011-2013 time period and is the result of three regulatory actions not directly related to our CRA performance,” said Santander spokeswoman Ann Davis in an email to the Reporter. “Our downgrade for 2011-2013 in no way reflects our current commitment to our customers and communities, including our substantial increase in community development investments in recent years.

Davis highlighted $3.4 billion in CRA activity during the 2014-2016 CRA period, with Santander increasing its CRA activity to $1.7 billion in 2016. These investments included hundreds of millions of dollars in mortgage and small business loans to low- and moderate-income families and communities, as well as community development loans and investments.

Thomas Callahan, executive director at the Dorchester-based Massachusetts Affordable Housing Alliance (MAHA) said that such a downgrade is “a big deal” and “very rare” for a bank of Santander’s size.
Santander is doing well in some CRA metrics. The Boston-Cambridge-Quincy MA-NH Multistate Metropolitan Area (Boston MMA) measures rate the bank at an overall “satisfactory” level. This balances the “high satisfactory” in lending, “low satisfactory” in service, and “needs to improve” in investment.
But the bank serves other regions — areas of Pennsylvania, Connecticut, New Jersey, Maryland, and Rhode Island among them.

“This rating is reflective of their overall performance in all of those states,” Callahan said. “In certain areas, they’ve done a better job. In Boston, I think mortgage lending is one of them, that they’ve actually been a leading lender in the Mass[achusetts] Housing Partnership program—- the MHPS ONE Mortgage program — which MAHA works with.”

“They do more than any other bank in the program,” he said.

Though Santander met a few weeks ago with business stakeholders, leaders in Boston’s communities of color are hoping to play an active role in mapping out Santander’s community benefits agreement. Several expressed displeasure that the bank has chosen to work with the National Community

Reinvestment Coalition (NCRC), based in D.C., to manage the community aspect of their commitments.
State Rep. Russell Holmes, the chairman of the Mass. Black and Latino Legislative Caucus, said, “This is a no brainer. We’re insisting that Santander Bank be respectful enough to negotiate a community benefits agreement directly with the able members of the community the bank failed. I and members of the Caucus will be standing with the community on this critical issue.”

NRCR will convene more than 30 community organizations, including groups in minority neighborhoods, to help develop the bank’s new five-year plan, Santander said.

“In Boston, it’s could they be doing more?” Callahan asked. “And I think this rating is a wake up call to the bank, to say we’ve got to make sure we’re addressing community needs aggressively throughout other neighborhoods that they operate in.”