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TD faces community advocates’ concerns over First Horizon deal

The Canadian lender touted its recent efforts to boost nonwhite homeownership and small businesses, as advocates spotlighted the bank’s mortgage lending record.


Dan Ennis Senior Editor | @Ennis77Dan

TD Bank, Toronto-Dominion Drew Angerer / Staff via Getty Images

Community advocates pushed the Office of the Comptroller of the Currency (OCC) and the Federal Reserve at a public hearing Thursday to make TD Bank’s proposed acquisition of First Horizon Bank contingent on a strong benefits agreement that includes more mortgage lending to borrowers of color and a steady branch presence in underserved areas.


Rachel Labush, a supervising attorney at Community Legal Services of Philadelphia, cited a 2018 report by the nonprofit group Reveal indicating TD, among large banks, was the most likely to deny a loan application from a Black or Latinx person.


“Unfortunately, since that reporting, TD Bank has not improved,” Labush said, according to The Globe and Mail.


Labush said her organization found that, in the past three years, TD was tied for the lowest percentage of mortgages to Black and Hispanic people among its peers and was less likely to approve a high-income Black applicant than a low-income White one.


 

Leo Williams, President/CEO of Springfield Neighborhood Housing Services in Massachusetts, said he was concerned about potential branch closures — particularly, a TD location in a predominantly Black and Latino community that is open two days a week.


“A great deal of consideration needs to be given to potential negative impacts on Black and Latino low-income individuals in these communities, Williams said.


 


TD executives at Thursday’s hearing, for their part, touted some of the bank’s recent initiatives, such as a credit program meant to boost homeownership in communities of color, and a $105 million equity fund TD established last year to support nonwhite-owned small businesses.


“We are proud of the role we play in our communities and we’re excited about the opportunity to expand our impact through our combination with First Horizon,” Leo Salom, TD’s U.S. CEO, said Thursday.


Some of that impact has yet to be settled, said Peter Skillern, executive director of Reinvestment Partners in North Carolina, according to American Banker.


Skillern said TD has been largely absent from discussions about housing and community development, but First Horizon has been actively engaged.


“Whose bank culture will prevail?” Skillern asked. “What will the bank culture do as far as valuation of diversity? What is the diversity commitment at the local level, not just in the aggregate?”


Tykeisa Nesbitt, speaking on behalf of Americans for Financial Reform, had a stronger directive for the OCC and the Fed.



“The banking regulators, along with the Department of Justice, urgently need to rethink bank merger guidelines to ensure members are serving the needs of their communities,” Nesbitt said. “Until then, bank mergers, including this one, should be blocked.”


Sen. Elizabeth Warren, D-MA, has been a vocal opponent of TD’s proposed tie-up with First Horizon. She wrote the OCC in June, asking the regulator to block the $13.4 billion deal over allegations that TD incentivized employees to enroll customers in new accounts and services such as overdraft protection without their consent, according to a Capitol Forum report from May.


Salom on Thursday noted that the bank is upgrading its overdraft policy — introducing low-balance alerts and a 24-hour grace period meant to let overdrawing users replenish their account to avoid a fee. The bank this year also will begin letting customers overdraw their accounts by up to $50 without charging a fee. Further, TD is eliminating a fee it charges when customers with overdraft protection transfer money from their savings account.


TD’s overdraft policy has landed it in hot water with regulators in years past. The bank paid a $25 million fine to the Consumer Financial Protection Bureau (CFPB) and $97 million in restitution to customers in a 2020 settlement over what the regulator deemed “deceptive” overdraft enrollment practices.



Not every community advocate came out against the pending acquisition.


“We are in support of this merger because we hope that it can bring additional resources to our community, but also communities across the country that can benefit from a larger bank that has essentially more resources,” William Stoudt, executive director of Rebuilding Together New Orleans, told regulators Thursday.


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First Horizon is not the only deal TD has in the works. The Canadian lender said this month it would buy Wall Street brokerage Cowen for $1.3 billion — a transaction set to close in the first quarter of 2023.


The First Horizon deal, too, has a first-quarter deadline. The banks may terminate or choose to extend the acquisition’s timeline if it isn’t complete by Feb. 27.


Regulators are accepting comments on the proposed combination through Tuesday.


Thursday’s event came amid an uptick in public hearings on large bank mergers, in line with a 2021 executive order from President Joe Biden. The Fed and OCC held a hearing in March concerning U.S. Bank’s proposed $8 billion acquisition of MUFG Union Bank. The regulators convened another hearing last month on Bank of Montreal’s proposed $16.3 billion acquisition of BNP Paribas’ Bank of the West.



Keep up with the story. Subscribe to the Banking Dive free daily newsletter


First Horizon is not the only deal TD has in the works. The Canadian lender said this month it would buy Wall Street brokerage Cowen for $1.3 billion — a transaction set to close in the first quarter of 2023.


The First Horizon deal, too, has a first-quarter deadline. The banks may terminate or choose to extend the acquisition’s timeline if it isn’t complete by Feb. 27.


Regulators are accepting comments on the proposed combination through Tuesday.


Thursday’s event came amid an uptick in public hearings on large bank mergers, in line with a 2021 executive order from President Joe Biden. The Fed and OCC held a hearing in March concerning U.S. Bank’s proposed $8 billion acquisition of MUFG Union Bank. The regulators convened another hearing last month on Bank of Montreal’s proposed $16.3 billion acquisition of BNP Paribas’ Bank of the West.




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