Case 5:11-cv-00488 Document 1 Filed 06/17/11 Page 1 of 7

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION

UNITED STATES OF AMERICA,

)

)

)

Plaintiff,

)

)

)

v.

)

)

)

NIXON STATE BANK,

)

)

)

Defendant.

)

____________________________________)

CIVIL ACTION NO. SA-11-CV-488

COMPLAINT

The United States of America alleges:

1. This action is brought by the United States to enforce the provisions of the Equal

Credit Opportunity Act, 15 U.S.C. §§ 1691-1691f (“ECOA”).

2. This Court has jurisdiction of this action pursuant to 28 U.S.C. § 1345 and 15

U.S.C. § 1691e(h). Venue is appropriate pursuant to 28 U.S.C. § 1391.

3. Defendant Nixon State Bank (“Nixon” or “the bank”) is an indep endent

community bank based in Nixon, Texas. Chartered in 1906, Nix on is the seventh oldest state-

chartered institution in Tex as. In addition to its location in Nix on, the bank op erates two

additional branches located in La Vernia, Texas and China Grove, Tex as. Nixon offers a wide

range of loan products, including mortgage loans, consumer loans, commercial loans, and

agriculture loans. The bank originates its loans through loan officers at its three branches.

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Case 5:11-cv-00488 Document 1 Filed 06/17/11 Page 2 of 7
4. As of September 30, 2009, the bank had total assets of $68.88 million and total equity capital of $6.65 million. Nixon is subject to the reg ulatory authority of the F ederal Deposit Insurance Corporation (“FDIC”).
5. Nixon is subject to feder al laws governing fair lending, including ECOA and the regulations promulgated thereunder. ECOA prohi bits financial institutions from discriminating on the basis of, inter alia, national origin in their lending pra ctices. Charging higher prices for loans on the basis of na tional origin, including charging higher rates of interest, is one of the discriminatory lending practices prohibited by ECOA. Nixon is a “creditor” within the meaning of section 702(e) of ECOA, 15 U.S.C. § 1691a(e).
6. Beginning in 2008, the FDIC conducted an examination of the lending practices of Nixon to evaluate compliance with ECOA. Based on analysis of the average rates of interest that Nixon charged in 2007 and 2008 for unsecu red consumer loans, the FDIC found reason to believe that Nixon had displayed a pattern or practice of discrimination on the basis of national origin against Hispanic borrowers. On April 14, 2010, followin g the examination described above, the FDIC referred the lendin g practices of Nixon to the United States Department of Justice pursuant to 15 U.S.C. § 1691e(g).
7. After receiving the referral from the FDIC, the United States analyzed the interest rates that Nix on charged between 2007 and 20 10 on unsecured consumer loans. The United States also reviewed Nixon’s loan policies and procedures from 2006 to 2010.
8. Prior to mid- to late- 2009, Nixon did not have a written loan pricing guideline for its unsecured consumer loans. The bank did not r equire a written application or credit report; utilize a uniform pricing system such as a matr ix or rate sheet; or d ocument loan denials.
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Case 5:11-cv-00488 Document 1 Filed 06/17/11 Page 3 of 7
Instead, Nixon’s loan officers w ere granted b road discretion in handlin g all aspects of t he unsecured consumer loan transaction.
9. Nixon has been aware of the flaws with its unsecured consumer lending policies and procedures since at least 2006. In April 2006, an independent au ditor recommended to Nixon that an application and a current credit report be obtained for all unsecured consumer loan applicants. The auditor also recommended that an analysis should be documented in the loan file for applications denied due to excessive debt-to-income. As a result of the auditor’s report, bank management made a recommendation to the Board of Directors to amend the bank’s loan policy to define how often an appli cation and credit re port should be obtained for unsecured loans. Around the same time, Nixon’s Training and Controls Monitoring Committee resolved to (1) define the meaning of a n application; (2) defi ne the meaning of a r ecent application; and (3) determine how often a credit report is needed.
10. The bank failed to implement any changes to address its discretionary loan pricing procedures from 2006 to mid-2009. In June 2008, the FDIC criticized Nix on for failing to include applications, fi nancial statements, credit reports, and other docu mentation in its loan files. In May 2009, another independent auditor of the bank detected some inconsistencies with bank-wide pricing and recommended that the bank become structured in its pricing strategies.
11. In mid-2009, Nixon’s CEO acknowledged the following issues in a memorandum to all emplo yees: (1) inconsistent and sometimes non-existent loan under writing; (2) inconsistency in loan administration; (3) inconsistency in loan pricing; and (4) inconsistency in following loan pricing. After this memorandum was issued, Nixon introduced new policies and procedures to improve it s overall fair lending program, including: (a) new loan procedures for
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Case 5:11-cv-00488 Document 1 Filed 06/17/11 Page 4 of 7
obtaining loan applications, financial statements, and cr edit reports; (b) revision of lo an worksheets to assist loan officers in underwriting and pricing criteria; (c) a new filing system to ensure that loans are fully and consistently documented; (d) a monitoring system for each loan to be reviewed and noted for deficiencies; (e) fair lending training for the bank’s loan officers; and (f) development of a uniform loan pricing matrix for unsecured consumer loans.
12. Between at least 2007 and 2009, Nix on charged higher loan p rices to H ispanic borrowers for unsecured consumer loans, as measured through rates of interest, than it charged to non-Hispanic borrowers. The dif ferences in inte rest rates charged to H ispanic borrowers and those charged to non-H ispanic borrowers cannot be ex plained fully by factors unrelated to national origin.
13. From at least 2007 to 2008, Nix on charged interest rates that wer e 207 basis points1 higher to Hispani c borrowers who obtained unsecured consumer loans than the r ates charged to non-Hispanic borrowers. In 2009, Nixon charged interest rates to Hispanic borrowers that were 118 basis points higher, on average, than the rates charged to non-Hispanic borrowers. These disparities are statistically significant.
14. After accounting for credit risk factors such as l oan term, credit score, and the branch office from which the loan originated, Nixon charged interest rates to Hispanic borrowers from 2007 to 2008 that were 198 basis points higher, on average, than the r ates charged to similarly-situated non-Hispanic borrowers. In 2009, Nixon charged interest rates to Hispani c borrowers that were 84 basis points higher, on a verage, than the rates charged to simila rlysituated non-Hispanic borrowers, after controlling for the same credit risk fa ctors. These disparities are statistically significant.
1 One basis point represents one hundredth of a percentage point (0.01%). -4-

Case 5:11-cv-00488 Document 1 Filed 06/17/11 Page 5 of 7
15. The higher rates of interest that Nixon charged to Hispanic bo rrowers for unsecured consumer lo ans are a result of Nix on’s policy or practice of giving its emplo yees broad subjective discretion in every aspect of the unsecured consumer loan transaction, from the information collected at the application stage to setting the interest rate. Information as to each applicant’s national origin was available and known to the bank’s loan officers, who personally handled each loan trans action at one of Nix on’s three br anch offices. Ni xon did no t properly instruct its loan officers regarding their obligation to treat prospe ctive customers without regard to national ori gin, and the bank has failed to su pervise or monitor the performance of its loan officers to ensure compliance with fair lending laws.
16. Nixon’s policy or practice of giving its employees broad subjective disc retion in handling every aspect of the unsecured consumer loan transaction has had a disparate impact on Hispanic borrowers compared to similarl y-situated non-Hispanic borrowe rs and is not justified by business necessity or legitimate business interests.
17. Nixon’s actions, policies and practices, as alleged herein, constitute discrimination against applicants with r espect to c redit transactions on the basis of national origin in violation of ECOA.
18. Nixon’s actions, policies and practices, as alleged herein, constitute a pattern or practice of resistance to the full enjoyment of rights secured by ECOA.
19. Persons who ha ve been victims of Nixon’s discriminatory actions, policies and practices are affected persons as defined in ECOA, 15 U.S.C. § 1691e, and have suff ered injury and damages as a result of Nixon’s violation of ECOA.
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Case 5:11-cv-00488 Document 1 Filed 06/17/11 Page 6 of 7
20. Nixon’s pattern or practice of discrimination has been intentional and willful, and has been implemented with reckless disregard for the rights of Hispanic borrowers.
WHEREFORE, the United States prays that the Court enter an ORDER that: (1) Declares that the policies and practices of the Defendant constitute
violations of the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-1691f; (2) Enjoins the Defendant, its agents, employees, and successors, and all other
persons in active concert or participation with it, from: (a) Discriminating on the basis of national origin against any person
with respect to any aspect of a credit transaction; (b) Failing or refusing to take such affirmative steps as may be
necessary to restore, as nearly as practicable, the victims of the Defendant’s unlawful conduct to the position they would have been in but for the discriminatory conduct; and
(c) Failing or refusing to ta ke such actions as may be necessary to prevent the recurrence of any such discriminatory conduct in the future.
(3) Awards monetary damages to a ll the victims of the Defendant’s discriminatory policies and pr actices for the injuries caused by the Defendant, pursuant to 15 U.S.C. § 1691e(h).
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Case 5:11-cv-00488 Document 1 Filed 06/17/11 Page 7 of 7 /s/ Robert Shaw-Meadow

2JS 44 (Rev. 12/07)

Case 5:11-cv-0048C8IVDIoLcuCmOeVntE1R-1SHFEileEdT06/17/11 Page 1 of 2

The JS 44 civil coversheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required bylaw, except as provided by local rules of court. This form, approved by the Judicial Conference of the United States inSeptember 1974, is required for the use of the Clerk of Court for the purpose of initiating the civil docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM.)

I. (a) PLAINTIFFS United States of America

DEFENDANTS Nixon State Bank

(b) County of Residence of First Listed Plaintiff
(EXCEPT IN U.S. PLAINTIFF CASES)

County of Residence of First Listed Defendant

Gonzales

(IN U.S. PLAINTIFF CASES ONLY)

NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE LAND INVOLVED.

(c) Attorney’s (Firm Name, Address, and Telephone Number) Coty R. Miller

Attorneys (If Known)

USDOJ, Civil Rights Division, 950 Pennsylvania Avenue, NW - G. Street,

Washington, DC 20530 (202) 305-0122

II. BASIS OF JURISDICTION (Place an “X” in One Box Only)

III. CITIZENSHIP OF PRINCIPAL PARTIES(Place an “X” in One Box for Plaintiff

u 1 U.S. Government Plaintiff

u 3 Federal Question (U.S. Government Not a Party)

(For Diversity Cases Only)

Citizen of This State

PTF u1

DEF u1

and One Box for Defendant)

Incorporated or Principal Place

PTF DEF u 4 u4

of Business In This State

u 2 U.S. Government Defendant

u 4 Diversity (Indicate Citizenship of Parties in Item III)

Citizen of Another State

u 2 u 2 Incorporated and Principal Place of Business In Another State

u 5 u5

Citizen or Subject of a Foreign Country

u 3 u 3 Foreign Nation

u 6 u6

IV. NATURE OF SUIT (Place an “X” in One Box Only)

CONTRACT

TORTS

FORFEITURE/PENALTY

BANKRUPTCY

OTHER STATUTES

u 110 Insurance

PERSONAL INJURY

u 120 Marine

u 310 Airplane

u 130 Miller Act

u 315 Airplane Product

u 140 Negotiable Instrument

Liability

u 150 Recovery of Overpayment u 320 Assault, Libel &

& Enforcement of Judgment

u 151 Medicare Act

u

u 152 Recovery of Defaulted

Student Loans

u

(Excl. Veterans)

u

u 153 Recovery of Overpayment

of Veteran’s Benefits

u

u 160 Stockholders’ Suits

u

u 190 Other Contract

u 195 Contract Product Liability u

u 196 Franchise

Slander 330 Federal Employers’
Liability 340 Marine 345 Marine Product
Liability 350 Motor Vehicle 355 Motor Vehicle
Product Liability 360 Other Personal
Injury

REAL PROPERTY u 210 Land Condemnation

CIVIL RIGHTS u 441 Voting

u 220 Foreclosure

u 442 Employment

u 230 Rent Lease & Ejectment u 240 Torts to Land u 245 Tort Product Liability u 290 All Other Real Property

u 443 Housing/
Accommodations u 444 Welfare u 445 Amer. w/Disabilities -

Employment u 446 Amer. w/Disabilities -

Other u 440 Other Civil Rights

PERSONAL INJURY u 362 Personal Injury -
Med. Malpractice u 365 Personal Injury -
Product Liability u 368 Asbestos Personal
Injury Product Liability
PERSONAL PROPERTY u 370 Other Fraud u 371 Truth in Lending u 380 Other Personal
Property Damage u 385 Property Damage
Product Liability
PRISONER PETITIONS u 510 Motions to Vacate
Sentence
Habeas Corpus: u 530 General u 535 Death Penalty u 540 Mandamus & Other u 550 Civil Rights u 555 Prison Condition

u 610 Agriculture

u 422 Appeal 28 USC 158

u 620 Other Food & Drug

u 423 Withdrawal

u 625 Drug Related Seizure

28 USC 157

of Property 21 USC 881

u 630 Liquor Laws

PROPERTY RIGHTS

u 640 R.R. & Truck

u 820 Copyrights

u 650 Airline Regs.

u 830 Patent

u 660 Occupational

u 840 Trademark

Safety/Health

u 690 Other

LABOR

SOCIAL SECURITY

u 710 Fair Labor Standards

u 861 HIA (1395ff)

Act

u 862 Black Lung (923)

u 720 Labor/Mgmt. Relations u 863 DIWC/DIWW (405(g))

u 730 Labor/Mgmt.Reporting u 864 SSID Title XVI

& Disclosure Act

u 865 RSI (405(g))

u 740 Railway Labor Act

FEDERAL TAX SUITS

u 790 Other Labor Litigation u 870 Taxes (U.S. Plaintiff

u 791 Empl. Ret. Inc.

or Defendant)

Security Act

u 871 IRS—Third Party

26 USC 7609

IMMIGRATION

u 462 Naturalization Application

u 463 Habeas Corpus -

Alien Detainee

u 465 Other Immigration

Actions

u 400 State Reapportionment u 410 Antitrust u 430 Banks and Banking u 450 Commerce u 460 Deportation u 470 Racketeer Influenced and
Corrupt Organizations u 480 Consumer Credit u 490 Cable/Sat TV u 810 Selective Service u 850 Securities/Commodities/
Exchange u 875 Customer Challenge
12 USC 3410 u 890 Other Statutory Actions u 891 Agricultural Acts u 892 Economic Stabilization Act u 893 Environmental Matters u 894 Energy Allocation Act u 895 Freedom of Information
Act u 900Appeal of Fee Determination
Under Equal Access
to Justice u 950 Constitutionality of
State Statutes

V. ORIGIN u 1 Original
Proceeding

(Place an “X” in One Box Only)

u 2 Removed from

u 3 Remanded from

State Court

Appellate Court

u 4 Reinstated or
Reopened

u

5

Transferred from another district

(specify)

u 6 Multidistrict
Litigation

Appeal to District

u7

Judge from Magistrate

Judgment

Cite the U.S. Civil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity):

VI.

CAUSE OF ACTION

15 U.S.C. Section 1691 et seq., Equal Credit Opportunity Act
Brief description of cause:

VII. REQUESTED IN

Civil rights complaint to redress unfair lending practices based upon national origin.

u CHECK IF THIS IS A CLASS ACTION

DEMAND $

CHECK YES only if demanded in complaint:

COMPLAINT:

UNDER F.R.C.P. 23

JURY DEMAND:

u Yes ✔u No

VIII. RELATED CASE(S)

IF ANY

(See instructions): JUDGE

DOCKET NUMBER

DATE
06/17/2011
FOR OFFICE USE ONLY

SIGNATURE OF ATTORNEY OF RECORD
/s/ Robert Shaw-Meadow, AUSA, W.D. Tex. (co-counsel/local counsel)

RECEIPT #

AMOUNT

APPLYING IFP

JUDGE

MAG. JUDGE

JS 44 Reverse (Rev. 12/07)

Case 5:11-cv-00488 Document 1-1 Filed 06/17/11 Page 2 of 2

INSTRUCTIONS FOR ATTORNEYS COMPLETING CIVIL COVER SHEET FORM JS 44

Authority For Civil Cover Sheet

The JS 44 civil cover sheet and the information contained herein neither replaces nor supplements the filings and service of pleading or other papers as required by law, except as provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose of initiating the civil dokcet sheet. Consequently, a civil cover sheet is submitted to the Clerk of Court foreach civil complaint filed. The attorney filing a case should complete the form as follows:

I. (a) Plaintiffs-Defendants. Enter names (last, first, middle initial) of plaintiff and defendant. If the plaintiffor defendant is a government agency, use only the full name or standard abbreviations. If the plaintiff or dfeendant is an official within a government agency, identify first the agency and then the official,giving both name and title.

(b) County of Residence. For each civil case filed, except U.S. plaintiff cases, enter the name of the county where the firstlisted plaintiff resides at thetime of filing. In U.S. plaintiff cases, enter the name of the county in which the first listed defendant resides at the time of filing. (NOTE: In land condemnation cases, the county of residence of the “defendant” is the location of the tract of land involved.)

(c) Attorneys. Enter the firm name, address, telephone number, and attorney of record. If there are several attorneys, list them on an attachment, noting in this section “(see attachment)”.

II. Jurisdiction. The basis of jurisdiction is set forth under Rule 8(a), F.R.C.P., which requires that jurisdictions be shown in pleadings. Place an “X” in one of the boxes. If there is more than one basis of jurisdiction, precedence is given in the order shown below.

United States plaintiff. (1) Jurisdiction based on 28 U.S.C. 1345 and 1348. Suits by agencies and officers of the United States are included here.

United States defendant. (2) When the plaintiff is suing the United States, its officers or agencies, place an “X” in this box.

Federal question. (3) This refers to suits under 28 U.S.C. 1331, where jurisdiction arises under the Constitution of the Unite d States, an am endment to the Constitution, an act of Congress or a treaty of the United States. In cases where the U.S. is a party, the U.S. plaintiff or defendant code takes precedence, and box 1 or 2 should be marked.

Diversity of citizenship. (4) This refers to suits under 28 U.S.C. 1332, where parties are citizens of different states. WhenBox 4 is checked, the citizenship of the different parties must be checked. (See Section III below; federal question actions take precedence over diversity cases.)

III. Residence (citizenship) of Principal Parties. This section of the JS 44 is to be completed if diversityof citizenship was indicated above. Markthis section for each principal party.

IV. Nature of Suit. Place an “X” in the appropriate box. If the nature of suit ncnaot be determined, be sure the cause of action, in Section VbI elow, is sufficient to enable the deputy clerk or the statistical clerks in the Administrative Office to determine the nature of suit. If the cause fits more than one nature of suit, select the most definitive.

V. Origin. Place an “X” in one of the seven boxes.

Original Proceedings. (1) Cases which originate in the United States district courts.

Removed from State Court. (2) Proceedings initiated in statecourts may be removed to the district courts under Title 28 U.S.C., Section 1441. When the petition for removal is granted, check this box.

Remanded from Appellate Court. (3) Check this box for cases remanded to the district court for further action. Use the date of remand as the filing date.

Reinstated or Reopened. (4) Check this box for cases reinstated or reopened in the district court. Use the reopening date as the filing date.

Transferred from Another District. (5) For cases transferred under Title 28 U.S.C. Section 1404(a). Do not use this for within district transfers or multidistrict litigation transfers.

Multidistrict Litigation. (6) Check this box when a multidistrict case is transferred into the district under authority of Title 28 U.S.C. Section 1407. When this box is checked, do not check (5) above.

Appeal to District Judge from Magistrate Judgment. (7) Check this box for an appeal from a magistrate judge’s decision.

VI. Cause of Action. Report the civil statute directlyrelated to the causeof action and give a brief description of the cause.Do not cite jurisdictional statutes

unless diversity.

Example:

U.S. Civil Statute: 47 USC 553 Brief Description: Unauthorized reception of cable service

VII. Requested in Complaint. Class Action. Place an “X” in this box if you are filing a class action under Rule 23, F.R.Cv.P.

Demand. In this space enter the dollar amount (in thousands of dollars) being demanded or indicate other demand such as a preliminary injunction.

Jury Demand. Check the appropriate box to indicate whether or not a jury is being demanded.

VIII. Related Cases. This section of the JS 44 is used to reference related pendi ng cases if any. If there are related pending cases, insert the docket numbers and the corresponding judge names for such cases.

Date and Attorney Signature. Date and sign the civil cover sheet.

 
 Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 1 of 20
FILED

JUN j 1 2011

IN THE UNITED STATES DISTRICT COURT FOR T~'~~h~·8i.T COURT

WESTERN DISTRICT OF TEXAS

BY

OF TEXAS

SAN ANTONIO DIVISION

DEPUTY clERk

UNITED STATES OF AMERICA, Plaintiff,
v. NIXON STATE BANK,
Defendant.

)
) ) CIVIL ACTION NO. SA-CV-II-488
) ) ) ) ) ) )

CONSENT ORDER I. INTRODUCTION
This Consent Order (Order) is submitted jointly by the parties for the approval of and entry by the Court simultaneously with the filing of the United States' Complaint in this action. This Order resolves the claims of the United States that Nixon State Bank ("Nixon" or "the bank") has engaged in a pattern or practice of lending discrimination on the basis of national origin in the pricing of unsecured consumer loans in violation of the Equal Credit Opportunity Act (ECOA), 15 U.S.C. §§ 1691-1691f.
Under the provisions of the Order, Nixon agrees to develop and establish uniform pricing policies and procedures designed to ensure that the prices it charges for the loans covered by this Order, including the portion of the price that reflects the discretion of the loan officer or any company employee, are set in a non-discriminatory manner consistent with the requirements of ECOA. Nixon also will compensate its Hispanic borrowers of unsecured consumer loans.
There has been no factual finding or adjudication with respect to any matter alleged by the United States. Accordingly, the execution of this Order is not, and is not to be considered as,

Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 2 of 20
an admission or finding of any violation of ECOA by Nixon. Nixon denies the United States' allegations that it engaged in national origin discrimination and maintains that at all times it conducted its lending in compliance with the letter and spirit of fair lending laws and in a non­ discriminatory manner. The parties have entered into this agreed Order to resolve voluntarily the claims asserted by the United States in order to avoid the risks and burdens of litigation. The parties agree that full implementation of the terms of this Order will provide a resolution of the allegations ofthe United States in a manner consistent with Nixon's legitimate business interests.
II. BACKGROUND
Chartered in 1906, Nixon is an independent community bank situated in the rural community of Nixon, Texas. The population of Nixon is approximately 2,186 persons, of which over 60% are Hispanic. According to the 2000 Census, the per capita income of Nixon is $10,135. Other than the original Nixon location, the bank has two other branches: one in La Vernia, Texas (estimated population 931) and one in China Grove, Texas (estimated population 1,247), which are also part of the San Antonio MSA. The Nixon and La Vernia branches are roughly the same size by assets and deposits, while the China Grove branch is approximately half the size of each of the other branches. Nixon offers a wide range of loan products, including mortgage loans, consumer loans, commercial loans, and agriculture loans. The bank originates its loans exclusively through loan officers at its three branch offices. As of September 30, 2009, the bank had total assets of $68.88 million and total equity capital of $6.65 million. Nixon is subject to the regulatory authority of the Federal Deposit Insurance Corporation ("FDIC").
Beginning in 2008, the FDIC conducted an examination of the lending practices of Nixon to evaluate compliance with ECOA. Based on analysis of the average rates of interest that Nixon charged in 2007 and 2008 for unsecured consumer loans, the FDIC found reason to believe that
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Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 3 of 20
Nixon had displayed a pattern or practice of discrimination on the basis of national origin against Hispanic borrowers. On April 14, 2010, following the examination described above, the FDIC referred the lending practices of Nixon to the United States Department of Justice pursuant to 15 U.S.C. § 1691e(g).
After conducting its own investigation and reviewing the information provided by the FDIC, the United States contends that Nixon has charged higher interest rates on unsecured consumer loans to Hispanic borrowers as compared to non-Hispanic borrowers from at least 2006 through December 31, 2009. The Complaint alleges that prior to 2010, the higher rates of interest that Nixon charged to Hispanic borrowers for unsecured consumer loans are a result of Nixon's policy or practice of giving its employees broad subjective discretion in every aspect of the unsecured consumer loan transaction, from the information collected at the application stage to setting the interest rate. Information as to each applicant's national origin was available and known to the bank's loan officers, who personally handled each loan transaction at one of Nixon's three branch offices. The Complaint alleges that prior to 2010, Nixon did not properly instruct its loan officers regarding their obligation to treat prospective customers without regard to national origin, and the bank has failed to supervise or monitor the performance of its loan officers effectively to ensure compliance with fair lending laws. The Complaint alleges that prior to 2010, Nixon's policy or practice of giving its employees broad subjective discretion in handling every aspect of the unsecured consumer loan transaction is not justified by business necessity or legitimate business interests. III. TERMS OF ORDER
1. Unless otherwise stated herein, the remedial provisions of this Order will be implemented within ninety (90) days of the Effective Date of this Order and will continue
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Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 4 of 20
throughout its term. The Effective Date of this Order will be the date on which it is approved and entered by the Court.
2. Unless otherwise stated herein, the types of loans covered by this Order include the following: auto purchase, secured (except for commercial and agricultural loans), unsecured, home purchase, home improvement, lot, construction, and certificate of deposit backed loans. A. General Prohibitory Injunction
3. Nixon, including all of its officers, employees, agents, representatives, assignees, and all those in active concert or participation with any of them, is hereby enjoined from engaging in any act or practice that discriminates on the basis of national origin in any aspect of a credit transaction in violation of ECOA. This prohibition includes, but is not limited to: the adoption, performance, or implementation of any policy, practice, or act that results in national origin discrimination in the charging of loan prices, including the portion of the loan price that reflects the discretion of the loan officer or any other company employee, to those who borrow money for loans covered by this Order.
4. This Order requires the bank to take actions to remedy its alleged discrimination. Nixon retains the discretion to take any additional actions that it believes are appropriate to achieve the goals of this Order. B. Pricing Policies and Procedures
5. In 2009, Nixon began to develop uniform pricing policies and procedures for unsecured consumer loans. Nixon will further revise these pricing policies to include the following: (1) standards for collecting applications, current financial documents, and credit reports for all borrowers for the loans covered by this Order; (2) standards for maintaining loan files for the loans covered by this Order; and (3) a uniform pricing matrix for the loans covered
4

Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 5 of 20
by this Order. The uniform pricing matrix must set forth objective, non-discriminatory standards for determining interest rates for the loans covered by this Order and, if the bank elects to retain a discretionary element in its loan pricing, must include: (i) limits on the amount by which the interest rate may deviate, either upward or downward, from the rate as determined by the matrix; (ii) the factors that a loan officer or bank official may consider in the exercise of that discretion; (iii) a requirement that each loan file must include written documentation of the factors set forth in the pricing matrix and, where the final interest rate varies from the published rate, the factors relied on in connection with an individual loan application and how those factors affected the pricing decision; and (iv) a requirement that before an interest rate is fixed, loan officers must inform applicants in writing that the rate is determined by a variety of factors and may be negotiable within limits set by the loan policies.
6. Nixon will provide a copy of its revised loan pricing policies to counsel for the United States within ninety (90) days of the Effective Date of this Order. The United States will have thirty (30) days from receipt of the loan pricing policies to raise any objections to them, and if it raises any, the parties shall confer to resolve their differences and the United States will obtain the position of Nixon's regulator with respect to such differences. In the event they are unable to do so, either party may bring the dispute to this Court for resolution. Until the Court resolves such a dispute, the revised loan pricing policies will not go into effect.
7. Nixon will require all loan officers and employees who originate loans covered by this Order to comply with the pricing policies; once approved by the United States. Nixon also will require an appropriate manager, under the supervision of a designated senior official of the bank, to review compliance with these requirements, including the existence of a legitimate non­ discriminatory reason for any disparities between Hispanic and non-Hispanic borrowers and
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Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 6 of 20
taking steps to ensure that discretionary loan prices do not vary materially by national origin. Any loan that is not in compliance with these requirements may not be funded. In the event that a loan inadvertently is funded in material violation of the policies, an appropriate refund will be provided to the borrower. All reviews shall be documented and kept in the loan files.
8. During the term of this Order, Nixon may change its loan pricing policies as set forth in paragraph 5 upon written advance notice to the United States, which will have thirty (30) days from receipt of such notice to raise any objection to the proposed change(s). If it raises any objection, the parties shall confer to resolve their differences and the United States will obtain the position of Nixon's regulator with respect to such differences. If they are unable to do so, either party may bring the dispute to this Court for resolution. Nixon will not implement the change(s) during such a dispute. C. Monitoring Program
9. Within ninety (90) days of the Effective Date of this Order, Nixon will have in place a monitoring program designed to ensure compliance with this Order. The program will be designed to monitor the bank's loans for potential disparities based on national origin. At a minimum, Nixon will monitor the interest rates of its loan products covered by this Order. The program also will require a quarterly review by senior managers. Each such quarterly review will be documented and presented to Nixon's Board of Directors for review and approval not later than sixty (60) days after the end of each quarter. Each quarterly review shall include, but not be limited to, an analysis designed to detect interest rate disparities based on national origin with respect to the bank's loan products covered by this Order.
a. In the event that any such review discloses interest rate disparities between Hispanic and non-Hispanic borrowers, Nixon will attempt to determine the reason(s) for those
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Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 7 of 20
disparities and will promptly take corrective action to address disparities that are attributable to a policy or practice of Nixon and not justified by a legitimate business need. Corrective action will include, as warranted, financial remediation for borrowers, further modifications to Nixon's pricing policies and/or monitoring programs as appropriate, and education, discipline, or termination of employee(s). Nixon will document all such disparities, determinations, and actions taken and will provide a summary of the quarterly reviews and any documentation and analysis relating thereto to the United States on a quarterly basis.
b. In the event that any such review discloses significant disparities with respect to any particular employee or branch, Nixon will require the employee or branch manager to explain the non-discriminatory reason(s) for those disparities. If there is no reasonable, non­ national origin-based explanation for the noted disparities, Nixon will require the employee or branch manager to take prompt corrective action to address the disparitjes.
10. If the United States raises any objections to Nixon's determinations or remedial actions, the parties will meet and confer to consider appropriate steps to address the concerns raised by the United States' review. If the parties are unable to come to an agreement regarding such objections, any party may bring the dispute to this Court for resolution. D. Notification to the United States and Right to Object
11. Nixon will provide a copy of the policies it utilizes to implement paragraphs 5-8 of this Order and descriptions of the monitoring programs required under paragraphs 9-10 to the United States within ninety (90) days of the Effective Date of this Order. The United States will have thirty (30) days from receipt of the policies and descriptions to raise any objections to them, and if it raises any, the parties shall confer to resolve their differences and the United States will
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Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 8 of 20
obtain the position of Nixon's regulator with respect to such differences. In the event the parties are unable to do so, either party may bring the dispute to this Court for resolution. E. Borrower Notices
12. Nixon will post and prominently display in each location where loan applications are received by the bank a notice of non-discrimination (a sample of which is attached as Appendix A).
13. Nixon will require its employees who originate loans covered by this Order to provide a notice of non-discrimination that provides substantially the same information as is contained in Appendix A. This disclosure will be in writing, signed by the originator and the borrower (if the borrower executes), and submitted by the originator to be made part of the loan file maintained by Nixon. This disclosure shall be made as early as practicable but not later than the time of the loan application. F. Equal Credit Opportunity Training Program
14. Within ninety (90) days of the Effective Date of this Order, Nixon will provide equal credit opportunity training to its management officials, loan officers, and any other employees or agents who participate in the origination of the bank's loans covered by this Order. During this training, Nixon will provide to each participant: (a) access to a copy of this Order and the loan policies adopted pursuant to it; and (b) training on the terms of this Order, the loan policies adopted pursuant to it, the requirements of ECOA, and his or her responsibilities under each. During the term of this Order, Nixon will provide annual training to covered employees with respect to his or her responsibilities and obligations under ECOA and this Order.
15. Nixon will secure from each employee or agent specified in the preceding paragraph a signed statement acknowledging that he or she has received access to a copy of this
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Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 9 of 20
Order and the loan policies and has completed the initial equal credit opportunity training. The signature of the acknowledgement may be either manual or electronic. These statements shall be substantially in the form of Appendix B (Acknowledgment) and Appendix C (Equal Credit Opportunity Training). During the term of this Order, each new employee or agent with substantive responsibility relating to the bank's loan programs covered by this Order will be provided access to a copy of this Order and given an opportunity to have any questions answered, and will sign the acknowledgment form statement (Appendix B) within ten (10) days of beginning his or her employment in that position.
16. The content of this training program will be approved in advance by the United States. Nixon will bear all costs associated with the training. G. Satisfaction of the United States' Claims for Monetary Relief
17. Nixon will deposit in an interest-bearing escrow account the total sum of $91,600 to compensate for monetary damages that affected persons may have suffered as a result of the alleged violations of ECOA with respect to unsecured consumer loans (the "Settlement Fund"). Title to this account shall be in the name of "Nixon State Bank for the benefit of affected persons pursuant to Order of the Court in Civil Action No. [xxx]". Nixon will provide written verification of the deposit to the United States within five (5) days of the Effective Date of this Order. Any interest that accrues will become part of the Settlement Fund and be utilized and disposed of as set forth herein.
18. Within thirty (30) days of the Effective Date of this Order, the United States will request any information it believes will assist in identifYing affected persons and determining any damages. Nixon will, within thirty (30) days of receipt of such request, supply, to the extent that it is within the bank's control, such information as requested. Requested data may be
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Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 10 of 20

supplied as a supplement to the database already provided to the United States by the bank in the

course of the United States' inquiry. To the extent that the information is not within Nixon's

control, the bank will, within thirty (30) days of receipt of such request, supply any data in its

control that identifies other parties that may have that the information.

19. The United States will, upon reasonable notice, be allowed access to the bank's

records and files to verify the accuracy of the data provided and to otherwise identify persons

entitled to the payments from the Settlement Fund.

20. Within ninety (90) days of the Effective Date of this Order, the United States will

provide to Nixon a list of affected persons and an amount each individual will receive from the

Settlement Fund to compensate for monetary damages these persons may have suffered, subject

to the conditions set forth in paragraph 21. Nixon will have sixty (60) days from receipt of such

list in which to review the list and the United States will consider in good faith any issues raised

by the bank.

21. Payments from the Settlement Fund to affected persons shall be subject to the

following conditions, provided that the details in administration of the Settlement Fund set forth

in paragraphs 22-23, can be modified by agreement of the parties and without further Court

approval: (a)

No affected person shall be paid any amount from the Settlement Fund until he or

she has executed and delivered to Nixon a written release, as set forth in Appendix D, of all

claims, legal or equitable, that he or she might have against the released persons and entities

regarding the claims asserted by the United States in this lawsuit, so long as such claims accrued

prior to the entry of this Order; and

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Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 11 of 20
(b) The total amount paid by Nixon collectively to the affected persons shall not exceed the amount of the Settlement Fund, including accrued interest.
22. Nixon will, no later than sixty (60) days after receiving the compensation list referred to in paragraph 20, notify each identified person eligible for compensation by a letter (using its reasonable best efforts to locate each person). The form of this letter will be subject to the review and approval of the United States. At a minimum, the letter will state that the identified person is eligible for compensation in the indicated amount provided he or she executes and returns to the bank a copy of the agreed-upon release, which release will be enclosed with the notice along with an addressed and postage-paid return envelope. Each letter will identify the loan(s) the bank originated to the identified person. The letter will explain the complaint resolution program referenced in paragraph 26 of this Order. If the parties are unable to agree on the terms of the letter, any party may bring the dispute to the Court for resolution. Any letters that are returned with a forwarding address shall promptly be re-sent to that new address. Nixon will provide an accounting of these notifications, indicating the name and address to which each was dispatched, within the sixty (60) day period referred to in this paragraph.
23. Nixon will issue checks in the amount indicated on the compensation list to all identified persons who execute and return the releases. Nixon will issue and mail such checks no later than twenty-one (21) days after the receipt of the release. Nixon will set forth reasonable deadlines for requirements of return of releases, and for the timely deposit of checks, subject to approval of the United States, so that the compensation is distributed and checks are presented for payment or become void prior to the date that is one year from the date the initial notifications are sent. Nixon will provide, as part of the reporting required in paragraph 28, an
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Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 12 of 20
accounting of releases received, checks sent, and notifications for which no response has been received or that were reported to be undeliverable. The United States may make its own efforts to locate affected persons.
24. Any moneys not distributed from the Settlement Fund, including accrued interest, within one year of the date the initial notifications are sent to persons deemed to be affected by the United States will be distributed to qualified organization(s) that provide credit counseling, financial literacy, and other related educational programs targeted at Hispanic borrowers. Nixon will consult with and obtain the approval of the United States in selecting recipient(s) of these funds, and the parties shall obtain the Court's approval prior to distribution of the fund. To the maximum extent practicable, these funds will be directed to organizations that work with borrowers living in the San Antonio MSA, where Nixon's branches are located. H. Complaint Resolution Program
25. During the period of this Order, Nixon will maintain a complaint resolution program to address consumer complaints alleging discrimination regarding loans originated by Nixon. Documentation regarding this complaint resolution program, including documentation of individual complaints and resolutions, if any, will be made available to the United States on a quarterly basis and included in the reports referenced in paragraph 27. A person will not be deemed ineligible for the complaint resolution program on the basis of having executed the release described in paragraph 21(a), but there is no requirement under this Order that any complaint necessarily be resolved for or against the bank.
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Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 13 of 20
IV. EVALUATING AND MONITORING COMPLIANCE 26. For the duration of this Order, Nixon will retain all records relating to its
obligations hereunder as well as its compliance activities as set forth herein. The United States will have the right to review and copy such records upon request.
27. Within six months of the effective date of this Order, Nixon will submit a report to the United States on the bank's progress in establishing and implementing each of the remedial items specified in this Order. A second report will be filed on the first anniversary of this Order. Thereafter, Nixon will submit a report annually for the term of the Order describing the actions taken in compliance with the provisions of the Order. The report will include an objective assessment of the extent to which each quantifiable obligation was met, an explanation of why any particular component fell short of meeting the goal for that year, and any recommendations for additional actions to achieve the goals of this Order. If applicable, Nixon will attach to the annual reports representative copies of training material and disseminated pursuant to this Order. V. ADMINISTRATION
28. The Order will terminate (a) three (3) months after the submission of Nixon's fourth annual report to the United States. Notwithstanding the above, this Order may be extended upon further motion of the United States to the Court, for good cause shown.
29. Any time limits for performance fixed by this Order may be extended by mutual written agreement of the parties. Other modifications to this Order may be made only upon approval of the Court, by motion by either party. The parties recognize that there may be changes in relevant and material factual circumstances during the term of this Order that may
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impact the accomplishment of its goals. The parties agree to work cooperatively to discuss and attempt to agree upon any proposed modifications to this Order resulting therefrom.
30. In the event that any disputes arise about the interpretation of or compliance with the terms of this Order, the parties will endeavor in good faith to resolve any such dispute between themselves before bringing it to this Court for resolution. The parties agree that if it either reasonably believes that the other party failed to comply with any obligation under this Order, it will provide written notice thereof and allow a period of at least thirty (30) days to discuss a voluntarily resolution of the alleged violation before presenting the matter to this Court. In the event of either a failure by Nixon to perform in a timely manner any act required by this Order or an act by Nixon, in violation of any provision hereof, the United States may move this Court to impose any remedy authorized by law or equity, including attorneys' fees and costs.
31. Nothing in this Order will excuse the bank's compliance with any currently or subsequently effective provision of law or order of a regulator with authority over Nixon that imposes additional obligations on the bank.
32. Nixon's compliance with the terms of this Order will fully and finally resolve all claims of the United States relating to the alleged violation of the fair lending laws by means of discriminating on the basis of national origin, as alleged in the Complaint in this action, including all claims for equitable relief and monetary damages and penalties. Each party to this Consent Order will bear its own costs and attorney's fees associated with this litigation.
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Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 15 of 20 33. The Court will retain jurisdiction for the duration of this Consent Order to enforce the terms of the Order, after which time the case will be dismissed with prejudice. SO APPROVED AND ORDERED, this;{L ta;'ofJiIJ<.2011.
ED BIERY CHIEF UNITED ST S DISTRICT JUDGE
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Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 16 of 20

TIle undersigned hereby apply for and consent to the entry of this Order:

For the United States:

JOHN E. MURPHY United States Attorney Western District ofTexas

THOMAS E. PEREZ Assistant Attorney General Civil Rights Division

/s/ Robert Shaw-Meadow ROB SHAW-MEADOW Assistant United States Attorney 601 NW Loop 410 Suite 600 San Antonio, Texas Tel.: (210) 384·7100 Fax: (210) 384-7312
For Nixon State Bank:

STEVEN H. ROSENBAUM Chief Civil Rights Division 1- usin and Civil Enforcement Section
JONM. EW 'eptity
COTY R. MILLER Trial Attorney United States Department ofJustice Civil Rights Division Housing and Civil Enforcement Section
950 PelIDsylvaniaAvenue, N.W. - G st.
Washington, DC 20530 Tel.: (202) 305·0122 Fax: (202) 514·1116 Coty.MiIlel'@usdoi,gov

10
HUntOl & Williams LLP Mellon Fil1ancia1 Center 1111 Brickell Avenue, Suite 2500 Miami, Florida 33] 31

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Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 17 of 20

APPENDIX A
We do Business in Accordance with Federal Fair Lending Laws

UNDER THE EQUAL CREDIT OPPORTUNITY ACT, IT IS ILLEGAL TO DISCRIMINATE IN ANY
CREDIT TRANSACTION:

On the basis of race, color, national origin, religion, sex, marital status, or age;

Because income is from public assistance; or

Because a right has been exercised under the Federal Consumer Credit Protection Laws.

IF YOU BELIEVE YOU HAVE BEEN DISCRIMINATED AGAINST, YOU SHOULD SEND
A COMPLAINT TO:

FDIC Consumer Response Center

OR

U.S. Department of Justice

1100 Walnut Street, Box #11

Civil Rights Division

Kansas City, MO 64106

Housing and Civil Enforcement

Tel.: 1-877-275-3342

Section

http://www .fdic.gov/consumersl

Washington, DC 20530

Tel: 1-800-896-7743

http://www.usdoj.gov/crt/housing

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Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 18 of 20

APPENDIXB Officer and Employee Acknowledgment

I acknowledge that on

, I was provided copies of the Consent Order

entered by the Court in United States v. Nixon State Bank (W.D. Tex.), and the loan policies

developed pursuant thereto. I have read and understand these documents and have had my

questions about these documents answered. I believe I understand my legal responsibilities and

shall comply with those responsibilities.

Signature Print Name Job Title Date

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Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 19 of 20
APPENDIXC Officer and Employee Training Certification
I certify that on _ _ _ _ _ _ _, I received training with respect to my responsibilities under the Consent Order entered by the Court in United States v. Nixon State Bank (W.D. Tex.), and the federal fair lending laws. I have had the opportunity to have my questions about them answered. I believe I understand my legal responsibilities not to discriminate under the federal fair lending laws, including the Equal Credit Opportunity Act, and shall comply with those responsibilities.
Signature Print Name Job Title Date
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Case 5:11-cv-00488-FB Document 3 Filed 06/21/11 Page 20 of 20
APPENDIXD Release
In consideration for the parties' agreement to the terms of the Consent Order entered in United States v. Nixon State Bank (W.O. Tex.), and the payment to me of pursuant to the Consent Order and effective upon that payment, I hereby release and forever discharge all claims, rights, remedies, and recoveries related to the facts of credit discrimination in the origination of unsecured consumer loans at issue in the litigation referenced above, and release and forever discharge all claims, rights, remedies, and recoveries arising from credit discrimination alleged in that litigation in connection with the origination of my loan(s), known and unknown, up to and including the date of execution of this release.
I understand that this releases those claims, rights, remedies and recoveries against Nixon State Bank, and against any and all related entities, parents, predecessors, successors, subsidiaries, and affiliates, and against any and all of their past and present directors, officers, agents, managers, supervisors, shareholders, and employees and their heirs, executors, administrators, successors in interest, or assigns.
Executed this _ day of ___, __.
Signature Print Name Address
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 Case: 5:11-cv-488 As of: 09/28/2011 09:52 PM CDT 1 of 1
U.S. District Court [LIVE] Western District of Texas (San Antonio) CIVIL DOCKET FOR CASE #: 5:11−cv−00488−FB

United States of America v. Nixon State Bank Assigned to: Chief Judge Fred Biery Cause: 15:1691 Equal Credit Opportunity Act
Plaintiff United States Of America

Date Filed: 06/17/2011 Jury Demand: None Nature of Suit: 440 Civil Rights: Other Jurisdiction: U.S. Government Plaintiff
represented by Robert Shaw−Meadow U.S. Attorney's Office 601 N.W. Loop 410 Suite 600 San Antonio, TX 78216 (210) 384−7355 Fax: 210/384−7312 Email: rob.shaw−meadow@usdoj.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED

V. Defendant Nixon State Bank

Date Filed 06/17/2011
06/17/2011
06/17/2011
06/17/2011 06/21/2011 06/21/2011 06/30/2011

# Docket Text
1 COMPLAINT . No Summons requested at this time, filed by United States Of America. (Attachments: # 1 Civil Cover Sheet)(Shaw−Meadow, Robert) Modified on 6/17/2011, to edit text (rf). (Entered: 06/17/2011)
2 Unopposed MOTION for Declaratory Judgment by Nixon State Bank, United States Of America. (Attachments: # 1 Proposed Order)(Shaw−Meadow, Robert) (Entered: 06/17/2011)
Case Assigned to Chief Judge Fred Biery. CM WILL NOW REFLECT THE JUDGE INITIALS AS PART OF THE CASE NUMBER. PLEASE APPEND THESE JUDGE INITIALS TO THE CASE NUMBER ON EACH DOCUMENT THAT YOU FILE IN THIS CASE. (kh2) (Entered: 06/17/2011)
If ordered by the court, all referrals will be assigned to Magistrate Judge Primomo (kh2) (Entered: 06/17/2011)
3 CONSENT ORDER GRANTING 2 Motion for Declaratory Judgment. Signed by Chief Judge Fred Biery. (rf) (Entered: 06/21/2011)
4 Receipt of certified mail doc #3 directed to to Mr. John Delionado. (rf) (Entered: 06/21/2011)
5 Acknowledgment of certified mail doc #3 directed to John Delionado. (rf) (Entered: 06/30/2011)