According to a report, black business owners in Michigan have filed lawsuits against Mercantile Bank Corp. citing discriminatory lending practices.
Entrepreneurs in the suit say Mercantile sought to increase minority lending but took a “zero tolerance approach” when borrowers sought to make arrangements for missed payments or to refinance loans. White loan customers were allegedly given the opportunity to work with the company when they ran into financial challenges for repayment.
“Black business borrowers who missed just one or two payments would have their loans called,” Attorney Jordan Hoyer wrote in the lawsuits, filed in U.S. District Court in Grand Rapids.
“And, when those borrowers told the bank that they could catch up or they would like to refinance, the bank told them that they were not interested in ‘that kind’ of business anymore,” Hoyer wrote in the suit.
The lawsuits were originally filed last month in Kent County Circuit Court then moved to federal court.
The report also indicates that the bank took efforts to attract black business owners, using billboards and target advertising and sending workers to businesses to build relationships in the minority community, according to the lawsuit. However, as early as 2006, Mercantile had a high percentage of non-performing assets or assets with borrowers missing payments, the lawsuit continued.
“Mercantile believed that its minority lending efforts were the problem,” Hoyer wrote further. “As a result, Mercantile instituted a policy that was both intentionally discriminatory and discriminatory in effect. By treating its black borrowers differently from its white ones, Mercantile aggressively called the loans on most, if not all, of the minority owned businesses it had recently targeted.”
The bank had previously been under scrutiny by a nonprofit called Inner City Press/Fair Finance Watch, which noted in a 2013 interview that it had been “watching Mercantile Bank since 2011, when it noticed the bank had not made any loans to minorities.” The bank defended its lending practices then, with its CEO and president, Michael Price, stating, “In its most recent CRA Performance Evaluation of Mercantile Bank, the FDIC concluded that ‘Mercantile Bank of Michigan has an outstanding record of helping to meet the credit needs of its assessment area, particularly low- and moderate-income individuals and small businesses, in a manner consistent with its resources and capabilities.’”
The bank had also faced allegations of discriminatory practices on mortgage loans during regulatory review of the merger between Mercantile and Firstbank Corp., a merger that was later approved.