U.S. Department of Justice secures USD 1.5 million settlement with SouthEast Bank over alleged discriminatory student loan refinancing

The U.S. Department of Justice announced that SouthEast Bank agreed to pay USD 1.5 million to resolve allegations that its student loan refinancing program disproportionately discouraged and denied Black and American Indian/Alaska Native graduates. A complaint filed on Jan. 18 in the Eastern District of Tennessee alleges that, between December 2015 and April 2021, the program automatically denied applicants who graduated from schools with default rates above bank-set thresholds, resulting in disparate exclusion rates. The complaint alleges Black bachelor’s degree recipients were as much as 4.3 times more likely to be excluded than non-Black recipients, and American Indian/Alaska Native recipients were as much as three times more likely to be excluded than non-American Indian/Alaska Native recipients; it also alleges the policy disproportionately excluded graduates of as many as 84.4% of majority-Black schools, including Historically Black Colleges and Universities, versus no more than 21.1% of non-majority-Black institutions. Under a consent order subject to court approval, the bank must spend USD 1.5 million to compensate affected applicants, increase access to refinancing for qualified graduates of previously excluded schools, and provide consumer financial education to students and graduates of those schools. The investigation originated from a referral by the Federal Deposit Insurance Corporation.