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Evans Bancorp isn’t only lender at risk of redlining lawsuit

State Attorney General Eric T. Schneiderman warned Tuesday that banks beyond Evans Bancorp could be sued for alleged redlining.

“We are looking at other banks in other parts of the state, and if banks do not agree to resolve these really disgraceful practices, then there will be further litigation,” Schneiderman said at a news conference in his Buffalo office.

Schneiderman made his remarks after his office filed a lawsuit against the parent company of Hamburg-based Evans Bank. The suit accuses Evans of redlining, or deliberately excluding predominantly African-American neighborhoods on the East Side of Buffalo from its mortgage lending and marketing practices.

Schneiderman said his office had become concerned about banks’ lending practices in minority communities in the years following the mortgage crisis, prompting an investigation.

“Financial institutions can’t use the fact that the housing market crashed as an excuse to exclude black communities from their loan products, to exclude black communities from the marketing, so they know what products are available, to exclude black communities from any access to service, and branches or ATMs,” he said.

Evans has denied any wrongdoing. In a statement following Schneiderman’s allegations Tuesday, Evans Bank CEO David J. Nasca said the bank was “confident that our residential lending practices meet all applicable laws and regulations that the allegations made today by the New York State attorney general are unfounded and without substance and we will vigorously defend this complaint through the legal system.”

Evans is a relatively small player in the Buffalo Niagara region compared with leaders M&T and First Niagara Financial Group in deposit market share, ranking sixth, according to the Federal Deposit Insurance Corp. data from June 2013. But Schneiderman said it was Evans’ lending statistics from 2009 to 2012 and a trade area map that drew his office’s attention.

The trade area map is a publicly available document, created by Evans, showing where Evans solicits business and markets its lending products and services. The map’s boundary excludes the East Side of Buffalo, as well as the west side of Cheektowaga, which is also heavily African-American.

“This is classic redlining,” Schneiderman said, tracing his finger around the boundary. “If you had to make up a hypothetical to explain to law students what redlining is, you would use a map like this.”

Schneiderman also cited statistics showing that from 2009 to 2012, Evans received 1,114 applications for residential mortgages in the Buffalo metro area, but only four were from African-American applicants. He also said of those 1,114 applications, only eight came from the East Side and just one of those was from an African-American. Schneiderman said that competing banks were lending at much higher rates.

Schneiderman was joined Tuesday by representatives of groups that belong to the Buffalo Community Reinvestment Coalition, who said the lawsuit helps them reinforce a point about lending practices in certain communities.

“Any time an action is taken to enforce the statutes and regulations that are applicable to banks, it helps us to be taken more seriously as a community movement,” said Aaron Bartley, executive director and co-founder of PUSH Buffalo. The coalition “is looking at banking practices across the region and has identified several gaps in serving the African-American community and low-income communities in general.”

Joseph A. Kelemen, executive director of the Western New York Law Center, said restrictive lending practices such as redlining can impact residents’ ability to obtain loans to buy and repair homes.

“These are the kinds of issues that really destroy neighborhoods,” Kelemen said. “There are a lot of neighborhoods on the East Side that are really, really nice neighborhoods.”

Kelemen said the remedy would be to ensure that banks treat the East Side neighborhoods the same as other markets they serve, through their marketing and access to facilities like branches and ATMs.

Schneiderman’s office filed its suit in the U.S. District Court for the Western District of New York. It accuses Evans of violating the Fair Housing Act, the New York State Human Rights Law and the code of the City of Buffalo, and seeks a jury trial.

“We hope that the bank will see the error of their ways and quickly start to comply with the law, but we don’t know how aggressively they’re going to fight it,” he said. “It’s hard to predict it.”

Meanwhile, Evans has set aside $1 million in reserve to cover expenses or possibly a fine, and is being represented by Dennis C. Vacco, an attorney with Lippes Mathias Wexler Friedman and a former state attorney general.

“The bottom line is that after several months of discussions with (Schneiderman’s) office to resolve this matter, the bank was not going to admit to something that it did not do,” Vacco said in a statement. “Evans Bank categorically denies these allegations.”

Schneiderman presented his own viewpoint of those talks:

“We never got close to an agreement in which Evans would accept responsibility for its misconduct, if I can put it that way. That was really the problem. They just did not want to accept responsibility for discrimination, for redlining, for their own documents.”