Chemung to pay $350k penalty as part of consent order

Chemung Financial in Elmira, N.Y., disclosed that its bank had entered into a consent order with the New York State Department of Financial Services to address alleged violations of the state’s fair lending law and federal Equal Credit Opportunity Act.

The order, signed last week, addressed issues the state regulator raised with Chemung Canal Trust’s indirect automobile lending program, the company said in a Tuesday regulatory filing. While it consented to the order, the bank did not consent to the agency’s findings.

The agency determined, after reviewing Chemung’s underwriting and pricing between Jan. 1, 2016, and Aug. 31, 2020, that dealer markups were higher for Hispanic borrowers compared to white borrowers. 

The $2.4 billion-asset Chemung said the agency found no evidence of “intentional discrimination. While the bank provides terms for auto loans, the dealerships have the discretion to increase interest rates above the bank’s buy rate. Chemung noted that it did not share in any of the dealer markups.

As part of the settlement, Chemung agreed to a $350,000 civil money penalty and to pay an estimated $53,000 in restitution to roughly 100 borrowers.

Chemung also agreed to move to a flat-fee business model and to notify participating dealerships each year to structure contracts in “a non-discriminatory manner.”