The SunTrust Watch - from
Inner
City Press
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Updated April 8, 2013
On
May 10, 2004, SunTrust
announced a $7 billion
proposal to acquire National Commerce Financial Corp. On May 17,
Inner
City Press /
Community on the Move and the Fair Finance Watch (together, "ICP")
filed a
12-page comments opposing the proposal, with the Federal Reserve
Board
in Washington, and
with the Federal Reserve Bank of Atlanta, particularly on the
issue of
SunTrust's funding
and enabling of high-cost car title lenders and even pawn and gun
shops. A summary
is below. See also, "Group Urges Fed to
Reject
SunTrust
Acquisition of NCF," by David Flaum, Memphis Commercial Appeal,
May 19,
2004 (ICP
"is concerned about SunTrust's relationships with 73 lenders that
loan
people money
on their autos, taking possession of the titles. 'SunTrust claims
to be
community friendly
but it funds companies that make these loans of last resort at
interest
rates that are 400
or 500 percent'"); "Consumer
Groups
Move to Block Bank's Purchase by SunTrust: Bank's Record on
Lending Practices is
Called into Question," by Richard Burnett, Orlando Sentinel,
May
18, 2004, Pg.
C1; "SunTrust's Plan to Buy Bank Runs into Protest," by Getahn
Ward,
The
Tennessean, May 18, 2004, Pg. 3E. See, beyond "SunTrust
Pledges
to Drop Ties to Payday and Title Lenders," by David
Weidner, CBS Market
Watch, July 21, 2004, and "SunTrust Won't Lend To Payday Lenders;
Citing reputation
risk, it goes further than agencies require," by Hannah Bergman,
American Banker,
July 22, 2004, Pg. 1, etc. And see, "SunTrust
Pledges
to Drop Ties to Payday and Title Lenders," by David
Weidner, CBS Market
Watch, July 21, 2004, and the editorials
quoted in the August 2, 2004, Report. The Federal Reserve's
September
14, 2004, Order
recites and relies on SunTrust's commitment. In this space, we
will
continue running
updates. For or with more information, contact us.
Update
of
April 8,
2013 -- In
the
first study of the just-released 2012 mortgage
lending data, Inner City Press and Fair Finance
Watch have found that Suntrust
Mortgage continued with high cost loans and
disparities by race and ethnicity in denials and
higher-cost lending. 2012 is the ninth year in
which the data distinguishes which loans are
higher cost, over a federally-defined rate
spread of 1.5 percent over
Treasury bill yields. The just released data show that Suntrust Mortgage confined African
Americans to higher-cost loans above this rate spread 2.5 times more frequently than whites in
2012, Fair Finance Watch has found. Suntrust
Mortgage confined Latinos
to higher-cost loans above the rate spread 1.4 times more
frequently than whites in 2012, the data show.
Update
of
March 15, 2010: The story goes that Barclays is
interesting
in
another North American buy, possibly SunTrust.
Update of September 28, 2009 --
Accused
recently
of predatory lending is SunTrust,
on
a larger than normal loan.
Update of April
6, 2009 -- In
the first
study of the
just-released 2008 mortgage lending data, Inner City Press /
Fair
Finance Watch
has found that SunTrust in 2008 denied applications by African
Americans 1.37
times more frequently than whites, while denying Latinos fully
1.78
times more
frequently than whites.
Update
of
October 6, 2008: Now it's
reported that JPMorgan Chase was
looking at SunTrust, before it got WaMu for a song. So is the
now-spurned Citi
now lusting after SunTrust?
Update
of
July 28, 2008: last week
the Fed
belatedly released a ruling
favoring SunTrust in its dealings with its presumptively illegal
but
"grandfathered" holdings of Coca-Cola story - click here to view.
The
Fed
justifies
its favor as reducing the mixing of banking and commerce.
Coke as a
mixer?
Update of April
10,
2006: The 2005 Home Mortgage Disclosure Act data, which
Inner
City Press / Fair Finance Watch received on April 8 from
SunTrust,
reveal that, considering all conventional first-lien
loans,
SunTrust in 2005 confined African Americans to rate spread loans
2.40
times more frequently than whites.
The Federal Reserve has defined
higher-cost loans as those loans with annual percentage rates
above the
rate spread of three percent over the yield on Treasury securities
of
comparable duration on first lien loans, five percent on
subordinate
liens. While comprehensive income comparisons will not be possible
until the aggregate data is released in September, ICP / Fair
Finance
Watch has designed an innovative way to consider income
correlations,
by calculating upper and lower income tranches based on each
lenders
own customers. Nationwide at SunTrust for conventional first-lien
loans, upper income African Americans were confined to higher cost
loans over the rate spread 3.05 times more frequently than whites.
Income does not explain the disparities at SunTrust. More analysis
will
be forthcoming. Until next time, for or with more
information, contact
us.
Some previous SunTrust-Watch reports:
Update of May 23, 2005: SunTrust
Securities Inc. has agreed to make refunds
to customers to settle federal regulators' allegations that it
overcharged large-scale
investors in mutual funds in 2001 and 2002, it was announced on
May 18.
The Securities and
Exchange Commission alleged that SunTrust Securities sold shares
in
mutual funds without
giving some customers the discounts in sales charges they were
owed, as
specified in the
funds' prospectuses. The SEC said the firm failed to provide all
the
appropriate discounts
even after the agency's staff had alerted it to prior lapses in
that
area. SunTrust
neither admitted nor denied wrongdoing in the settlement but did
agree
to pay restitution
plus interest and to refrain from future violations of
securities
rules. The firm also was
censured. The amount of the restitution was not specified by the
SEC.
The agency did say
in its announcement that the National Association of Securities
Dealers, the brokerage
industry's self-policing organization, has estimated that
SunTrust
overcharged customers
by $201,117. Mike McCoy, a spokesman for SunTrust Banks, said
the
company declined
comment. ICP note: as SunTrust did
in
connection with its loan payday lender loan in 2005, in
violation of
its mid-2004
commitment to cease such loans...
Update of April 18, 2005:
SunTrust, when cumulated
with the Memphis-based bank it acquired in 2004, imposed
higher-cost
rate spread loans
1.92 times more frequently on African Americans than on whites,
while
denying African
Americans’ applications 2.55 times more frequently than those of
whites, and denying
Hispanics’ applications 1.55 times more frequently than those of
whites. There are
other issues are SunTrust. In response to ICP’s comments on its
Memphis
acquisition,
showing that SunTrust was funding dozens of payday lenders and car
title lenders, SunTrust
sent a letter to the Federal Reserve, copied to ICP, stating that
"[a]fter consider
the potential reputational risks and consumer harm that could
result
from lending to such
a company, STI is revising its credit policies to prohibit future
loans
to all businesses
that engage in payday or title lending." See,
e.g.,
the July 28, 2004 Memphis Commercial Appeal, “NCF, SunTrust Ditch
Payday
Lenders - Answer Activists’ Challenge Ahead of Bank Merger,” and
Orlando
Sentinel, “Bank Shuns Payday - SunTrust Halts Loans to Fast-Cash
Industry.”
In monitoring SunTrust’s compliance with this commitment,
ICP
has come upon
evidence of a January 2005 loan from SunTrust secured by “all
proceeds”
of Cash
Advance, Inc. of Jacksonville, Florida. ICP raised this to
SunTrust
last week, in
connection with obtaining the 2004 mortgage data, and SunTrust
refused
to address the
seeming violation of the commitment it made, citing its
“confidentiality
obligations” but stating that this was a “banking relationship
that
pre-dated
our representations to the Fed last July.” But the loan to Cash
Advance
was filed as
an “initial” Uniform Commercial Code lien on January 25, 2005,
more
than six
months after SunTrust’s commitment to cease such lending. Another
defense being
offered is that while the loan is secured by all proceeds of Cash
Advance, Inc., it is
somehow not a business loan. ICP has
now
raised this SunTrust issue to federal and state regulators (in
Georgia
and Tennessee) for
their action; ICP is committed to independent verification and
monitoring of commitments.
Some earlier reports:
Update of January 18, 2005: SunTrust
on January 12 disclosed that the
Securities and Exchange Commission has issued subpoenas for
documents
as part of a formal
investigation of its financial statements. The probe involves
discrepancies in the loss
reserve related to loans SunTrust finances for people who buy
cars
through auto dealers...
Until next time, for or with more information, contact us.
Update of September 14, 2004: Earlier today,
the
Federal Reserve
issued its SunTrust - NCF order,
from which we'll highlight footnote 27, reciting that ICP
criticized SunTrust’s relationships with unaffiliated payday
lenders, car-title lending companies, and other nontraditional
providers of financial services. SunTrust noted that SunTrust
Bank and
National Commerce lend to a small number of such companies that
are
engaged in lawful businesses governed by state law and regulated
and
licensed by the states. SunTrust, however, stated that it was
voluntarily revising its credit policies to prohibit future
loans to
any business that engages in payday or car-title lending and
that this
policy would apply to National Commerce businesses after the
merger.
Well alright. In light of Wachovia's and SouthTrust's
misrepresentations to the Fed
about their policies (and actual practices) in this regard, we'll
be
monitoring. Also of
interest in the Fed's SunTrust order is note 42, about Wal-Mart.
ICP had
expressed concern about National Commerce’s branching
arrangements with Wal-Mart, under which National Commerce
provides
banking services through its branches in certain Wal-Mart
retail
stores. NBC currently operates 25 in-store branches in Georgia
and
Tennessee and plans to open 70 additional in-store branches in
Georgia
and Florida, for a total of 95 branches in Wal-Mart stores.
SunTrust
stated that NBC runs the operations of each branch, but that
the two
parties jointly market the program under the trade name,
"Wal-Mart
Money Center, by National Bank of Commerce." The branches
provide
traditional banking services to customers and are subject to
examination by the appropriate federal banking agency in the
same
manner as any bank branch. The Board notes that the OCC
concluded that
NBC’s operation of branches under this trade name was
consistent with
the Interagency Statement on Branch Names. See Comptroller of
the
Currency, Interpretive Letter #977, December 2003. See also,
Board of
Governors of the Federal Reserve System, Supervision and
Regulation
Letter 98-14, June 3, 1998.
In addition, the commenter noted general concerns about
Wal-Mart’s treatment of its employees. Employees of the NBC
branches at
Wal-Mart locations are bank employees, not Wal-Mart employees.
Moreover, such concerns involving employment practices are
outside the
limited statutory factors that the Board is authorized to
consider when
reviewing an application under the BHC Act. See Western
Bancshares,
Inc. v. Board of Governors, 480 F.2d 749 (10 th Cir. 1973).
The
commenter also criticized Wal-Mart’s attempts to enter the
banking
system. The Board notes that Wal-Mart does not control any
insured
depository institution and, consequently, is not deemed to be
a bank
holding company. In addition, National Commerce’s branching
agreement
with Wal-Mart does not cause the store to control a depository
institution and, therefore, does not make Wal-Mart subject to
the BHC
Act.
This too, we'll monitor.
Update of August 30, 2004: On the bank beat,
this
double-dance has
become routine: settling lawsuits by lowering the break-up fee,
then
keeping the date on
consummation undefined, to foil the plots, schemes or strategies
of
arbitrageurs. The
latter dance step was exemplified by Citigroup on Golden State;
the
former, Charter One
did, and now NCF-SunTrust (fee dropped from $280 million to $204
million - and what else,
undisclosed?) They're also being vague about when they'd close.
Until
next time, for or
with more information, contact us.
Update of August 9, 2004: Two meetings have
been
scheduled for Sept.
15 for shareholders to vote on SunTrust Banks Inc.'s proposed $7
billion takeover of
National Commerce Financial Corp.. Meanwhile it has emerged that,
despite its commitment
to cease funding payday and car title lending, SunTrust continues
with
pawnshops, for
example American Trading Post Pawn, Inc. of Crystal River,
Florida.
Distinguishing these
industries is illusory, including according to the recent study,
"Analysis of
Alternative Financial Services"...
Update of August 2, 2004: From the editorial
board
of the Orlando
Sentinel from their July 30 edition, "SunTrust was Right to End
Business with Payday
and Car Title Lenders" -- "SunTrust made its decision to cut ties
with
such
lenders after a consumer group filed a complaint with the Federal
Reserve opposing the
bank's pending merger with National Financial Corp. of Memphis,
Tenn.
Among other
complaints, Inner City Press/Fair Finance Watch said records
showed
SunTrust had at least
60 customers making payday or car-title loans. Announcing its
decision,
SunTrust cited the
‘potential reputational risks and consumer harm’ that could come
from
lending to
such companies. How candid, and how refreshing. ICP believes
SunTrust's
decision could
persuade other banks -- especially those seeking government
approval
for mergers -- to
follow suit. Let's hope so." Thanks, Orlando Sentinel. Here also
is an
editorial in
the Memphis Commercial Appeal of July 31:
"National Commerce Financial Corp. and SunTrust Banks recently
decided to stop doing business with companies that provide
payday or
car title loans. The move, while commendable, appears to have
been done
to win favor with federal regulators who will decide whether to
approve
a merger between NCF and SunTrust. Whatever the motives, the
decision
shows why high interest loans that are frequently made to lower
income
borrowers deserve careful scrutiny....A protest by the Inner
City
Press/Community on the Move and Fair Finance Watch apparently
helped
NCF and SunTrust see the light... Those words should be a
wake-up call
to local companies that want to deal in those types of loans.
Unless
they're willing to accept more regulation and greater
accountability,
maybe more major financial institutions will follow the lead of
NCF and
SunTrust.
And then car title lenders will know what it feels like to
struggle to
get a loan."
That last sentiment, we like how the Commercial Appeal's
editorial
board put it. (Click
here
for the
full text of these
editorial, and more). Until next time, for or with more
information, contact
us.
Update of July 20-26, 2004: SunTrust Banks, responding to
evidence of its support
of payday lenders and car title lenders submitted by Inner City
Press /
Fair Finance Watch
in opposition to SunTrust's applications to buy National Commerce
Financial Corp., has now
told the Federal Reserve that
"after considering the potential reputational risks and
consumer
harm that could result from lending to such a company, STI is
revising
its credit policies to prohibit future loans to all businesses
that
engage in payday or title lending. This policy will apply to
National
Commerce businesses."
This SunTrust statement, contained in a letter to
the
Federal Reserve from
SunTrust's Corporate Compliance Manager, followed ICP's public (in
among others Orlando
and Memphis)
submission of Uniform Commercial Code filings showing SunTrust's
and
NCF's connections to,
among others:
AMERICAN TITLE PAWN OF CHATTANOOGA, INC.; BESSEMER TITLE
PAWN
INC.; AMERICAN
TITLE PAWN OF MIDFIELD INC.; AMERICAN TITLE PAWN OF MONTGOMERY,
INC.;
AMERICAN TITLE PAWN
OF FORT VALLEY, INC.; Homewood Title Pawn, Alabama; Huffman
Title Pawn,
Alabama; Mr. Title
Pawn of Anniston, Forestdale, Gasden and Green Springs, AL;
Tarrant
City Title Pawn,
Alabama, Title Pawn of Georgia, US Title Loan & Pawn of
Phoenix
City, Alabama, etc.
ICP also submitted a South Carolina UCC filing,
dated
November 24, 2003,
showing NCF's Central Carolina Banks' relationship with South
Carolina
Title Loan Company
of Greenville, SC; etc..
SunTrust's announcement, into which we are still
inquiring, will have
implications for a number of other institutions, including (only
as
examples among banks
beginning with "W"), Wachovia
(and SouthTrust -- see Reuters
of
June 21, 2004) and Wells Fargo,
funder of the military-focused payday lender Armed Forces Loans.
Developing...
Update of July 19, 2004: Well, ICP has
filed
a third timely
comment, all of them unrebutted by SunTrust.ICP's first submission
showed SunTrust's
relationships with a number of fringe finance institutions,
including
so-called auto title
lenders, a/k/a title pawns. ICP's second submission, of June 28,
included evidence of
further connections, including by NCF's Central Carolina Banks
unit.
Now, with SunTrust still not having responded, ICP has
submitted the following:
a Georgia UCC filing, dated November 4, 2003, showing SunTrust's
relationship with Cash
Loans of Stone Mountain, Inc, of Stone Mountain, Georgia;
a Georgia UCC filing, dated November 4, 2003, showing SunTrust's
relationship with Cash
Loans of Marietta, Inc, of Marietta, Georgia;
a Florida UCC filing, dated June 21, 2002, showing SunTrust's
relationship with AAA
Cash Fast of Sarasota, Florida; and
a Tennessee UCC filing, dated April 12, 2002, showing National
Bank
of Commerce's
relationship with Lakewood Pawn of Old Hickory, Tennessee.
As shown, the FRB has asked applicant banks about such
relationships with payday
/ quick cash lenders, pawnshops and more; there will be no basis
for
withholding the names
of such fringe financiers, not only because of sample disclosures
of
similar information
by SunTrust's peers (previously named by ICP), but because as
shown in
the exhibits
hereto, such information is publicly available. ICP has been
informed
that the FRB's
thinking is that if a bank's submission mixes public and
non-public
information, it might
all be withheld. This is impermissible under FOIA (all reasonably
segregable information
must be released). ICP explicitly requests that response(s) to FRB
questions for lists of
funded fringe financiers be split between public information (the
names
of all funded
fringe financiers that appear in UCC filings or any other public
filing), and any
assertedly non-public information. The comment period should be
extended -- ICP raised
this issue two months ago, in order to be able to reply to
SunTrust's
responses.
Mortgage lending (HMDA) data reported for 2002 show that
SunTrust Bank
disproportionately excludes and denis African Americans and, where
applicable, Latinos,
while SunTrust Mortgage, Inc. has a less-than-credible zero
percent
denial rate in many
MSAs (leading to a presumption of HMDA- and ECOA-violation). For
example, for conventional
home purchase loans in 2002 in the Athens, Georgia Metropolitan
Statistical Area (MSA),
SunTrust Mortgage reported 100% approval rates for whites and
African
Americans.
Meanwhile, SunTrust Banks denied the applications of African
Americans
7.14 times more
frequently than whites.
In the Albany, Georgia MSA in 2002 for conventional home purchase
loans, SunTrust
Mortgage reported 100% approval rates for African Americans and
whites.
Meanwhile,
SunTrust Banks denied the applications of African Americans 2.78
times
more frequently
than whites. SunTrust must explain these disparities, and the
less-than-credible 100%
approval rates of SunTrust Mortgage, as related to compliance with
HMDA
(which requires
reporting of denials) and ECOA (which requires the provision of
notices
of adverse
action). ICP is requesting a hearing on these issues as well;
ICP's
hearing request should
be granted. Until next time, for or with more information, contact us.
Update of June 28, 2004: ICP submitted a
first comment at the
earliest possible time -- on May 17, 2004 -- stating its
opposition to
the proposal, under
the Community Reinvestment Act, based on lending disparities,
foreseeable branch closures
and service reductions, antitrust, and, particularly, SunTrust's
enabling of high-cost car
title pawn lenders and other predatory fringe financial
institutions.
ICP then waited to see SunTrust's application to the FRB,
presuming that given
the facts presented to the FRB and SunTrust in ICP's May 17
submission,
SunTrust's
application would address these fringe finance issues. Having now
received a copy of
SunTrust's application, it appears that SunTrust is not addressing
the
issue. ICP is
submitting additional information at this time, and reiterates its
request for a hearing,
an extension of the comment period, and that SunTrust's
applications be
denied.
ICP's first submission showed SunTrust's relationships
with a
number of fringe
finance institutions, including so-called auto title lenders,
a/k/a
title pawns. Now,
given SunTrust's deafening silence on this issue that the FRB has
already publicly
acknowledged is relevant to review of merger applications under
the BHC
Act (for example,
in the North Fork - GreenPoint proceeding, in which North Fork is
represented by the same
counsel as SunTrust), ICP is submitting herewith evidence of these
further connections:
a Georgia UCC filing, dated November 8, 2002, showing SunTrust's
relationship with
Instant Cash Loans on Car Titles, Inc., of Jonesboro, Georgia;
a Georgia UCC filing, dated November 4, 2003, showing SunTrust's
relationship with Cash
Loans of Stone Mountain, Inc., of Stone Mountain, Georgia;
a Georgia UCC filing, dated November 4, 2003, showing SunTrust's
relationship with Cash
Loans of Marietta, Inc., of Marietta, Georgia;
a Florida UCC filing, dated June 21, 2002, showing SunTrust's
relationship with AAA
Cash Fast of Sarasota, Florida;
a South Carolina UCC filing, dated November 24, 2003, showing
NCF's
Central Carolina
Banks' relationship with South Carolina Title Loan Company of
Greenville, SC;
a North Carolina UCC filing, dated November 24, 2003, showing
NCF's
Central Carolina
Banks' relationship with National Jewelry & Pawn, Inc., of
Durham,
NC;
a North Carolina UCC filing, dated July 17, 2003, showing NCF's
Central Carolina Banks'
relationship with North Kerr Pawn, of Wilmington, NC;
a North Carolina UCC filing, dated April 12, 2004, showing NCF's
Central Carolina
Banks' relationship with Instant Cash Machines, Inc., of
Kernersville,
NC; and
a North Carolina UCC filing, dated January 2, 2004, showing NCF's
Central Carolina
Banks' relationship with Ash-Cash, Inc., of Raleigh, NC.
For the record, the FRB has asked applicant banks about
such
relationships with
pawnshops and more: for the record, the FRB asked North Fork on
May 20:
"For any business relationship (e.g. commercial lender,
warehouse lender, purchaser, custodian, etc.) that North Fork
or
GreenPoint or any of their affiliates have with any subprime
lenders
(including providers of non-traditional banking products, such
as check
cashers, title lenders, pawn shops, or rent-to-own
businesses): (i)
identify the relevant business parties and (ii) describe the
nature of
the business relationships... Additionally, to the extend not
already
covered in your May 10, 2004 response to the comments of the
Inner City
Press Community on the Move & Fair Finance Watch ('the May
10
response'), describe any due diligence that North Fork or
GreenPoint
typically conducts concerning any such subprime lender's
compliance
with applicable fair lending and consumer protection laws
prior to
North Fork or GreenPoint entering into these business
relationships,
including... (c ) any monitoring or other ongoing procedures
North Fork
or GreenPoint has adopted to access compliance with these
laws. Provide
a copy of such procedures that are used to determine whether
third
party originators are engaged in, or facilitating, abusive
and/or
predatory lending practices."
Forty days ago, ICP submitted to the FRB documentation of
SunTrust's
funding of car
title lenders and pawnshops. Now, given that SunTrust neglected to
address the issue in
its just-filed application, ICP has submitted additional evidence.
Clearly, a similar
question should be posed to SunTrust, and NCF, by the FRB.
Specifically, this question:
"For any business relationship (e.g. commercial lender,
warehouse
lender, purchaser, custodian, etc.) that SunTrust or NCF or any
of
their affiliates have with any subprime lenders (including
providers of
non-traditional banking products, such as check cashers, title
lenders,
pawn shops, or rent-to-own businesses): (i) identify the
relevant
business parties and (ii) describe the nature of the business
relationships... Additionally, to the extend not already covered
in
your responses to the comments of the Inner City Press Community
on the
Move & Fair Finance Watch, describe any due diligence that
SunTrust
or NCF typically conducts concerning any such subprime lender's
compliance with applicable fair lending and consumer protection
laws
prior to SunTrust or NCF entering into these business
relationships,
including... (c ) any monitoring or other ongoing procedures
SunTrust
or NCF has adopted to access compliance with these laws. Provide
a copy
of such procedures that are used to determine whether third
party
originators are engaged in, or facilitating, abusive and/or
predatory
lending practices."
Note in advance that there will be no basis for
withholding
the names of such
fringe financiers: for example, SunTrust's peer National City has
disclosed the names of
payday lenders it funds, and BNP Paribas has disclosed the list of
subprime lenders with
which it has business relationships. Neither have suffered
competitive
harm, within the
meaning of FOIA exemption 4, and neither would SunTrust. ICP is
requesting a hearing on
this issue, which SunTrust has yet to address (that is, the issue
is
not being addressed
in writing; ICP's hearing request should be granted).
Mortgage lending ("HMDA") data reported for 2002 show that
SunTrust
Bank and SunTrust Mortgage, Inc. disproportionately exclude and
deny
African Americans
and, where applicable, Latinos. ICP's review has continued,
finding
that SunTrust
Mortgage, Inc. has a less-than-credible zero percent denial rate
in
many MSAs (leading to
a presumption of HMDA- and ECOA-violation). For example, for
conventional home purchase
loans in 2002 in the Florence, Alabama Metropolitan Statistical
Area
(MSA), SunTrust
Mortgage reported 100% approval rates for whites and African
Americans.
Meanwhile,
SunTrust Banks denied the applications of African Americans 6.9
times
more frequently than
whites. (Note that SunTrust Banks received a "Low Satisfactory"
rating
on the
lending test in Alabama, as recited in the Application).
In the Gainesville, Florida MSA in 2002 for conventional
home
purchase loans,
SunTrust Mortgage reported 100% approval rates for African
Americans
and whites.
Meanwhile, SunTrust Banks denied the applications of Latinos 5.95
times
more frequently
than whites. SunTrust must explain these disparities, and the
less-than-credible 100%
approval rates of SunTrust Mortgage, as related to compliance with
HMDA
(which requires
reporting of denials) and ECOA (which requires the provision of
notices
of adverse
action). ICP is requesting a hearing on these issues as well;
ICP's
hearing request should
be granted.
See also, "North Carolina Lawmakers Take Aim at
Payouts for
Executives Ousted in Mergers," Durham Herald-Sun, June 16, 2004,
reporting that
seven National Commerce Financial executives will share
golden parachutes worth $ 17 million in severance pay when the
merger
becomes effective -- even if they don't lose their jobs. The
executives
also will receive immediate vesting in stock options
potentially worth
tens of millions more, as well as unspecified retention
bonuses of
SunTrust stock.
NCF Chief Executive William R. Reed stands to receive at
least $ 2.5 million, while chief operating officer Richard
Furr, who's
based in Durham, and chief credit officer J. Scott Edwards
could
receive more than $ 2 million apiece... Federal tax law also
penalizes
executives and their companies for "excessive golden
parachutes." If
change-in-control payments are more than three times greater
than the
executive's average compensation over the past five years, the
executive must pay excise taxes and the company loses its
federal tax
deduction over a certain level.
According to NCF's regulatory filing, the company will
reimburse its executives if their golden parachutes incur
federal
excise taxes.
An NCF spokeswoman declined to discuss the specifics of
the
bank's golden parachutes. The company doesn't discuss employee
contracts, she said...
These issues should be discussed and inquired into at the
hearing ICP is
requesting, on the grounds above. Until next time, for or with
more
information, contact
us.
Update of June 1, 2004: While we await
SunTrust's
applications for
regulatory approval, we note, beyond the growing list of car title
lender and pawnshop
connections, that "there is significant geographical overlap
between
SunTrust and
National Commerce. Out of the latter's total of nearly 500
branches,
139 are within a mile
of a SunTrust branch, so widespread closures are likely. In spite
of
this, SunTrust claims
that, 'because there is little overlap between our footprints, our
customers will continue
to do business with the people they know and trust.'" One expects
this
to be
clarified, and pawnshops addressed, in the application;
developing...
Until next time, for
or with more information, contact us.
May 17, 2003
Board of Governors of the Federal Reserve System
Attn: Chairman Alan Greenspan, Governors, Secretary Johnson
20th Street and Constitution Avenue, N.W.
Washington, DC 20551
Re: SunTrust's proposal to acquire National Commerce
Financial
Corp and its affiliates -- ICP's Protest at earliest possible
time to
applications related thereto
Dear Chairman Greenspan, Governors, Secretary Johnson, FRB:
On behalf of Inner City Press/Community on the Move and
its
members and
affiliates, including the Fair Finance Watch (collectively,
"ICP"),
this is a
comment at the earliest possible time opposing, requesting public
hearings on and copies
of all applications related to the proposal, announced by SunTrust
on
May 10, 2004, to
acquire National Commerce Financial Corp and its affiliates
("NCFC").
ICP is commenting at the earliest possible time to
state its opposition to
the proposal, under the Community Reinvestment Act, based on
lending
disparities,
foreseeable branch closures and service reductions, antitrust,
and,
particularly,
SunTrust's enabling of high-cost car title pawn lenders and other
predatory fringe finance
(see below, & attached).
ICP's ongoing review of Uniform Commercial Code
(UCC)
filings shows
SunTrust's relationships with a number of so-called auto title
lenders,
a/k/a title pawns
-- fringe finance companies which make high-cost loans while
taking
ownership documents of
the borrowers' cars as collateral. This is a controversial, many
say
predatory, business,
and SunTrust's support of it is inconsistent, ICP contends, with
the
Community
Reinvestment Act. A sampling of ICP's findings:
a Tennessee UCC filing, dated February 18, 2003, showing
SunTrust's
relationship with
AMERICAN TITLE PAWN OF CHATTANOOGA, INC.;
an Alabama UCC filing, dated November 3, 2003, showing SunTrust's
relationship with
BESSEMER TITLE PAWN INC.;
a Virginia UCC filing, dated November 12, 2003, showing
SunTrust's
relationship with
ARLINGTON PAWN, INC.;
a Florida UCC filing, dated June 21, 2003, showing SunTrust's
relationship with
DISCOUNT MUSIC PAWN & GUN INC.;
a Florida UCC filing, dated December 3, 2003, showing SunTrust's
relationship with
HARVEY'S CHECK CASHING INC.;
an Alabama UCC filing, dated February 18, 2003, showing
SunTrust's
relationship with
AMERICAN TITLE PAWN OF MIDFIELD INC.;
an Alabama UCC filing, dated October 10, 2002, showing SunTrust's
relationship with
AMERICAN TITLE PAWN OF MONTGOMERY, INC.;
a Georgia UCC filing, dated June 14, 2001, showing SunTrust's
relationship with
AMERICAN TITLE PAWN OF FORT VALLEY, INC.;
a Florida UCC filing, dated July 15, 2003, showing SunTrust's
relationship with
AMERICAN TRADING POST PAWN, INC.; etc. (see below).
SunTrust funds and enables car title pawn lenders
and
other predatory
fringe financial institutions. As such, ICP contends that SunTrust
is
involved in
predatory lending, and ICP is requesting public hearings and that,
on
the current record,
SunTrust's applications be denied, on the grounds of SunTrust's
enabling of predatory
fringe finance, and, relatedly, of SunTrust's mortgage lending
disparities.
Mortgage lending ("HMDA") data reported for 2002
show
that
SunTrust Bank and SunTrust Mortgage, Inc. disproportionately
exclude
and deny African
Americans and, where applicable, Latinos. For example, for
conventional
home purchase
loans in 2002 in the Nashville Metropolitan Statistical Area
(MSA),
SunTrust Mortgage
denied African Americans' applications 4.82 times more frequently
than
those of whites.
Even combined with SunTrust Bank (this cumulation is referred to
hereinbelow as
"SunTrust"), SunTrust denied African Americans' applications 3.20
times
more
frequently than those of whites.
In the Norfolk, Virginia MSA in 2002, SunTrust
denied
African Americans'
applications 3.92 times more frequently than those of whites. In
the
Orlando, Florida MSA
in 2002, SunTrust denied Latinos' applications 2.95 times more
frequently than those of
whites. In the Jacksonville, Florida MSA in 2002, SunTrust denied
African Americans'
applications 2.54 times more frequently than those of whites.
In the Knoxville, Tennessee MSA in 2002, SunTrust
denied African
Americans' applications 5.7 times more frequently than those of
whites.
These disparities
are troubling, even more so when one considers SunTrust's enabling
of
higher-cost fringe
finance institutions in the same communities.
Other fringe finance and predatory institutions
funded
by SunTrust, with
state and dates of (some of) the transactions, include
American Title Pawn of Cleveland, Tennessee (February 18, 2003);
American Title Pawn of Opelika, Alabama (December 7, 2001);
American Title Pawn of Phoenix City, Alabama (October 1, 2002);
American Title Pawn of Rossville, Georgia (February 17, 2003);
Colonial Pawn, Inc., Florida, November 13, 2002;
Crossroad Pawn and Sales, Georgia, October 12, 2001;
Cuso's Jewelry and Pawn, Florida, February 5, 2004;
Dearfield Pawnbrokers, Florida, February 27, 2002;
Diamond Pawn and Jewelry, Florida, June 28, 2002;
Dixie Pawn Shop of Greeneville, Tennessee, June 2002;
Dixie Pawn Shop of Jefferson City, Tennessee, June 2001;
Greenbreir Pawn, Virginia, July 2003;
Gunsmoke Enterprises, Gun Mart, Tennessee, April 2001;
Homewood Title Pawn, Alabama, November 2003;
Huffman Title Pawn, Alabama, November 2003;
ITZ the Pawn Shop and Jewelry, Florida, April 2004;
Joe's Check Cashing, Georgia, January 2001;
Mr. Check Casher, Florida, June 2002;
Mr. Title Pawn of Anniston, Forestdale, Gasden and Green Springs,
AL, February 2003;
Nathan's Lynnhaven Pawn Shop, Virginia, March 2003;
Nation's Pawn and Jewelry, Florida, February 2001;
Paradise Pawn, Florida, June 2002;
Pat's Pawn and Gun Shop, Florida, January 2003;
Port City Pawn Shop, Georgia, April 2002;
Quick-Cash Pawn Shop East, Florida, June 2002;
South Florida Gun and Pawn, Florida, May 2002;
Tarrant City Title Pawn, Alabama, November 2003;
Title Pawn of Georgia, December 2001;
U.S. Title Loan and Pawn of Phoenix City, Alabama, February 2003;
U.S. Title Loan and Pawn of Greeneville, Tennessee, January 2003;
Vinton Pawn Shop, Virginia, November 2001
Welsh Pawn Shop, Georgia, December 2003.
The FRB, in an April 1, 2004, letter to Regions Financial,
following ICP's
submission of far less evidence that this in connection with
Region's
Union Planters
proposal, asked
Please describe all business relationships involving Regions or
Union Planters and any of their direct or indirect subsidiaries
(as lender
or provider of credit facilities, for example) and
unaffiliated
payday lenders or car title lenders. In doing so,
identify the relevant parties and describe the nature of the
relationships, including the respective roles and
responsibilities of
the (i) payday lender or car title lenders and (ii) Regions,
Union
Planters, or any subsidiary of either company. Discuss whether
Regions,
Union Planters, or any subsidiary of either company plays any
role,
formal or otherwise, in the lending practices and credit review
processes of the lender(s). Additionally, describe the
due
diligence concerning each lender's compliance with
applicable consumer
protection and fair lending laws that Regions or
Union Planters
typically conducts before extending a loan or providing a credit
facility to such a lender. (Emphasis added).
Here, SunTrust lends / provides credit facilities to car
title lenders (and pawn
and gun shops) throughout Georgia, Tennessee, Alabama, Florida,
Virginia, Maryland and
elsewhere. At a minimum, questions like the above must be posed by
the
Federal Reserve at
the earliest possible time, including to allow comment on the
response.
Note that
SunTrust's competitors, such as National City, release the names
of
payday lenders and
other lenders they have relationships with, and that thus there
would
be no basis for
SunTrust to withhold its list (including because many of the
SunTrust-funded companies'
names are already publicly available, in UCC filings and
elsewhere, see
above).
Other issues that should be inquired into, including at the
timely
requested
evidentiary hearing, regard SunTrust's projected cost (and
service)
cutting, including
possible branch closing. See, e.g., the Savannah Morning
News
of May 13, 2004,
quoting SunTrust spokesman Barry Koling that "there will be job
cuts
among the
companies' 33,000 employees" and projecting branch closures. See
also,
the Knoxville
News-Sentinel of May 11, 2004: "SunTrust, which won the No. 3 spot
last
year from
locally owned Home Federal Bank, reported $1.4 billion in local
deposits while NCF's
National Bank of Commerce, whose local offices include branches in
Kroger supermarkets,
reported $310 million... Locally, SunTrust has 40 branches from
the
Tri-Cities through
Loudon County, just west of Knoxville, and National Bank of
Commerce
has 22. Together,
they have almost 50 branches in Knox and the adjacent counties of
Anderson, Blount, Loudon
and Sevier."
And see, Roanoke Times of May 11, 2004:
"In
the Roanoke
Valley.... SunTrust had 13.2 percent and National Bank of Commerce
had
11 percent,
according to the FDIC..... There are 13 SunTrust branches in the
Roanoke Valley and 20 NBC
branches." See also, the Richmond Times Dispatch of May 11, 2004:
"The
deal
would create an odd dynamic for Richmond's First Market Bank.
First
Market was created in
1997 in a venture that matched Ukrop's Super Markets Inc. of
Richmond
with National
Commerce, the Memphis bank merging with SunTrust. Ukrop's owns 51
percent of First Market,
and the Tennessee bank, which has no branches in the Richmond
area,
owns 49 percent.
SunTrust, on the other hand, operates 46 branches in the area...If
the
deal goes through,
First Market could find itself partners with a major local banking
competitor." Also
to be explored at the timely requested public hearings are issues
related to SunTrust's
Publix branching, and, prospectively, in and with Wal-Mart. (See,
generally,
Atlanta Journal-Constitution of May 11, 2004, "SunTrust hitches
ride
with
Wal-Mart"). The requested hearing is also needed to inquire into
and
address the
implications of the substantial issues which are swirling around
NCFC's
"partner" Wal-Mart, regarding not only the treatment of employees
and
the
environment, but also Wal-Mart's repeated (and repeated rejected)
attempts to enter the
banking system.
There is more to say, but ICP will await copies of
the
applications,
copies of the FRB's letters to SunTrust, and the banks'
responses. On the
grounds set forth above, public hearings should be held, and,
SunTrust's applications
should be denied. If you have any questions, please immediately
telephone the undersigned,
at (718) 716-3540.
Respectfully submitted,
Matthew Lee, Esq., Executive Director
To be continued; developing... For or with
more
information, contact
us.
Click here
for Inner City
Press' front
page.
ICP
has published a (double) book about
the JPMChase-relevant topics of subprime lending, and corporate
fraud -
click here
for
sample chapters, here
for an interactive map,
here
for
fast ordering
and
delivery, and here for
other ordering
information.
The Pittsburgh
City
Paper of Dec. 11, 2003, says that the "novel Predatory
Bender: A Story of
Subprime Finance may, in fact, be the first great American
lending
malfeasance
novel." Click here
for that
review; click here to Search This
Site
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