NJCA: CRA Agreement Needed for Provident and Lakeland Merger to Ensure Redlining Settlement & Services for LMI BIPOC Communities

Newark, NJ December 21, 2022 – On December 15, New Jersey Citizen Action (NJCA) delivered a letter to the Federal Reserve Bank of New York requesting that the merger of Provident Financial Services and Lakeland Bancorp be approved only with a forward looking, NJ-specific Community Reinvestment Act (CRA) agreement, and inclusion of the settlement requirements in the recent $13M Consent Order between the United States and Lakeland Bank for illegal redlining practices.

“I join with NJCA in asking that the merger of Provident and Lakeland be approved only with a CRA agreement that includes the recent $13M Consent Order between the U.S. and Lakeland for its illegal redlining,” said Newark Mayor Ras J. Baraka. “I also ask that because Newark was most impacted by Lakeland’s redlining, that the CRA agreement also include all of NJCA’s recommendations that are Newark and New Jersey-specific. I commend NJCA for its strong leadership in the fight to stop redlining in New Jersey.”

In the Consent Order issued in September, the Department of Justice reached a $13 million settlement with Lakeland Bank for engaging “in a pattern or practice of lending discrimination by ‘redlining’ in the Newark metropolitan area”, which violated the Fair Housing Act and denied low- and moderate-income (LMI) and BIPOC consumers access to credit with reasonable interest rates and clear terms and conditions. In addition to the $13 million for loan subsidies to Black and Hispanic borrowers, Lakeland agreed to open two new branches in the impacted area (one of the two in Newark), assign 5 employees to service these loans and customers full-time, and maintain an expanded CRA Assessment Area covering Essex, Somerset, and Union counties.

“Redlining is racist and illegal,” said Phyllis Salowe-Kaye, President of NJCA and signatory of the letter to the Federal Reserve. “In the last two years, there have been more than 10 mergers approved in New Jersey. As banks get bigger they must get better, and we cannot let them continue to refuse to make loans in our communities of color. Provident has a long-term partnership with NJCA and a strong equitable lending record, so we are hopeful they will comply with the DOJ settlement and incorporate NJCA’s additional terms once the merger is finalized.”

This is the third largest redlining DOJ settlement in US history, and second in New Jersey. NJCA played a major role in the largest, Hudson City Savings Bank in 2015 at $27 million. M&T Bank was required to comply with Hudson’s Consent Order once their merger was approved, and NJCA partnered with the new bank to ensure lending goals would be met.

“Lack of access to fair financial products is a major driver of systemic inequity and intergenerational poverty,” said Christian Estevez, NJCA Board of Directors Co-Chair, CWA New Jersey Political Director and Founder of the Latino Action Network. “Enforcing terms like those in the Consent Order and the CRA agreement is vital for holding banks accountable for unfair and illegal practices towards historically marginalized communities. We cannot let the consequences of Lakeland’s racist decisions and policies be lost in the shuffle of a merger.”

In its letter, NJCA analyzed Lakeland’s mortgage lending data for 2018-2021 in Essex, Somerset, and Union Counties, finding the bank fell substantially behind its peers in lending to lower income and minority borrowers, and especially to black borrowers. In the latter, Lakeland’s loans to black residents only consisted of 1.7% of its total loans, compared to 6.7% for Provident and 8.1% for other banks.

NJCA found that Lakeland also fell behind other banks in branch locations in LMI minority communities. Only 4% and 7% of Lakeland’s branches were in these neighborhoods, respectively, compared to 31% and 25% for Provident, or 37% and 24% for other banks.

Including a CRA agreement in the merger approval would ensure Provident meet its stated commitment to community development for marginalized populations and fulfillment of the Consent Order. NJCA is asking for the following terms to be included in the agreement:

  • Develop specific and measurable goals to provide below market mortgages, discounted home improvement loans, small business loans, construction and permanent financing and loans for community and economic development.
  • Establish a statewide Community Advisory Board (CAB) composed of diverse community leaders who work with the LMI BIPOC population
  • Work with the CAB and other community organizations to determine if additional branches or services are needed if the merger results in branch closures
  • Develop a transparent process that includes community input when determining where to locate the second branch required in the DOJ Consent Order.
  • Establish “Listening Sessions” with high level key bank staff to provide them with information on the needs of the LMI BIPOC community.
  • Invest in the “NJ Forty Acres and a Mule Fund” (NJ FAM FUND) for real estate and small business development for Black and Latino partners

Additional commitments are needed in the City of Newark, which was most impacted by Lakeland’s redlining:

  • Hold at least two Town Hall meetings in the City of Newark to assess community needs before deciding location of the new branch required in the Consent Order.
  • Invest in the Acquisition Fund established in the Mayor’s Equitable Growth Initiative to mitigate the effects of owner-occupied homes being purchased by large scale investors.
  • Participate in the “Live Newark Program” to assist first time homebuyers in the City.
  • Invest in the “Neighborhood Development Fund ” that turns city-owned land into residential and affordable housing.