As part of the decision, the commission ordered Thomas Richter and Girard Finance Co. to cease discriminatory lending practices and pay a total of $668,951 to seven borrowers for damages plus humiliation and suffering.
Furthermore, the company and Richter were each ordered to pay $10,000 in civil penalties to the commonwealth.
The order was filed because the Commission found the Bala Cynwyd, Pa.-based financial services company and its owner (Richter) targeted minorities for unfair business practices related to commercial real estate lending.
According to the order, Girard Finance Company issued loans for commercial properties, including several local taverns, that targeted primarily African-American neighborhoods in Philadelphia that included interest rates as high as 35%, plus high fees and penalties without justification. Additionally, Girard would frequently “flip” loans, or reset mortgage rates without benefitting the borrower.
“Lenders who prey on minority-owned small businesses in this way need to know it isn’t just unfair, it is illegal,” said JoAnn Edwards, executive director of the Pennsylvania Human Relations Commission. “Loan terms and conditions must be based on financial qualifications, not race.”
Meanwhile, the company also neglected to run credit checks or review lenders’ financial histories to assess their ability to repay a loan. These and other practices alleged in the complaint order all meet legal tests for predatory lending.
“The record is replete with evidence that Girard Finance and Richter preyed on minorities to make a profit,” the Commonwealth Court opinion stated. “The testimony of Richter’s own witnesses, and claimants’ testimony, show Girard Finance and Richter made a living buying and selling the same bars over and over in the minority community.”
The court’s decision ends appeals made by Girard Finance against the PHRC’s order, which was initially filed in October 2011.