PROTECTING A BANK'S REPUTATION WHILE IT SETTLES A CASE OF ALLEGED RACIAL BIAS
One of the nation's largest banks faced a serious public relations and image problem when it became the target of a U.S. Department of Justice (DOJ) probe into alleged racial bias in mortgage lending. The DOJ had threatened a high profile civil suit charging one of the bank's subsidiaries with violating the Fair Housing Act (and possibly other laws). If not contained, word about the lawsuit could severely damage the bank's good name and dramatically affect new loan originations. The situation was exacerbated by the fact that the bank had a pending application with the Federal Reserve Board to acquire another major financial institution.
Background and Situation Analysis
The bank had been accused of discrimination in so-called "overages," which at the time was a relatively new area of evaluation and regulation for fair housing and lending. The bank contended that there was no government definition of overage discrimination in guidelines, regulations or statutes.
In working with the Federal Reserve Board, the bank used experts to analyze the records as they existed. Based on this expert analysis, it was the bank's view that no illegal discrimination took place. Moreover, it was the belief of the bank's legal counsel that the bank would be exonerated if the case went to trial.
However, because of the nature of the transactions, the dearth of relevant records, and the ex post facto nature of the DOJ's concern, the bank began settlement discussions with DOJ.
The bank strongly believed that it did not violate the law and was not guilty of misconduct or bias and would be vindicated in court. However, the bank resolved that its interests would best be served by settling the threatened suit. It was virtually certain that the settlement would become a major news story and likely gain major play in the nation's dailies, newswires, the trade press, and possibly the major TV networks.
As N&A moved forward with a contingency crisis communications plan, the goals were to protect the bank's purchase of another bank (approvals of which were pending from the Federal Reserve Board and the Office of Controller of Currency) and minimize any damage to the bank's management, reputation and credibility. The communications strategy was to "bridge" (shift) the media's attention from the bank to the general issue of standard industry overage practices.
While the bank negotiated the settlement and maintained control over the message and DOJ statements, N&A media trained selected bank spokespeople and developed an extensive Q&A document to deal with the issue from a myriad of perspectives. A history of the overage loans was also prepared emphasizing that the transactions were long ago, small in number and limited to only one or two branches, and that there was no intentional bias. A fact-based chronology was compiled to document past lending practices and other issues of possible media interest. Separately, a detailed report was prepared on initiatives that the bank had taken over the past few years to make credit available to low-income and minority customers. N&A also assisted the bank in helping communicate the settlement news to internal audiences and coordinating communications efforts with the DOJ.
- A highly charged issue had been diffused with a workable settlement negotiated between the DOJ and the bank.
- What could have become a running story in hundreds of media outlets around the country ended up as a "one-day" story.
- Facts, figures and the rationale for the settlement were accurately reported in all media with appropriate comments from bank spokespersons.
- Criticisms of the bank were put in a context of understanding.....without irrational arguments and emotion.
- The bank went on to make an important strategic acquisition of another financial institution.