UNITED STATES OF AMERICA,
Plaintiff,

v.

SECURITY STATE BANK
OF PECOS,
Defendant.

______________________________

The United States and Security State Bank of Pecos (Security or the bank) stipulate as follows:

1. The United States has this date filed its Complaint against Security alleging violations of the Equal Credit Opportunity Act, 15 U.S.C. §§ 1691-1691f.

2. The Complaint alleges that Security has engaged in a pattern or practice of discrimination on the basis of national origin in the extension of consumer loans that resulted in Hispanic customers paying more for their loans than similarly situated non-Hispanic customers. More specifically, the United States alleges that at least since October 1, 1991, and continuing at least until October 31, 1993, Security charged Hispanic borrowers higher annual percentage rates (APRs) for general consumer, non-mortgage related installment and single-payment loans than the rates charged to similarly situated non-Hispanic borrowers.

3. Security does not deny the allegations of the United States. The bank emphasizes, however, and the United States does not dispute that the pricing differences between Hispanics and non-Hispanics were apparently caused by the actions of one employee of the institution. When the staff of the bank's primary federal regulator, the Board of Governors of the Federal Reserve System (the Federal Reserve), documented the pricing differences, the bank began to more closely monitor the performance of the responsible employee, and that person is no longer employed by the bank. The parties agree that the controversy should be resolved without further proceedings and without an evidentiary hearing. Therefore, the parties have consented to the entry of this Stipulated Judgment as indicated by the signatures appearing below.

   The bank and the Federal Reserve have discussed the development and implementation of appropriate plans, policies, and procedures to avoid unlawful conduct in the future pursuant to orders or agreements between the bank and the Federal Reserve. This Judgment is designed to remedy the previous discriminatory conduct.

It is hereby ORDERED, ADJUDGED and DECREED:

4. I.

   Security, its employees, agents, and all other persons in active concert or participation with Security are permanently enjoined from imposing, on the basis of national origin, different terms or conditions on any loan product, including general consumer, non-mortgage related installment and single-payment loans (consumer loans). The terms and conditions include, but are not limited to the method of determining and calculating interest and the interest rate.

5. II.

   Within thirty (30) days after execution of this Stipulated Judgment, and throughout the term of this Stipulated Judgment, every Security employee who regularly participates in decisions of whether or not to extend consumer credit and/or participates in decisions regarding the terms of such credit, and every officer and director of Security shall be provided with a copy of this Stipulated Judgment.

6. III.
   1. Within forty-five (45) days after execution of this Stipulated Judgment, Security shall send, by first class mail, to counsel for the United States⁽¹⁾

      a proposed, written customer assistance program designed to provide information to customers and prospective customers relating to Security's consumer loans. Such program shall be described in both English and Spanish, and designed to provide, at a minimum, the following information to potential customers regarding Security's consumer loans:

      1. The current terms of each type of consumer loan offered by Security;

      2. How to qualify for each type of consumer loan offered by Security; and

      3. How to prepare a credit application.

   2. If, within thirty (30) days after receipt of the proposed customer assistance program described above, counsel for the United States indicates in writing to Security that it does not agree with the proposed customer assistance program, then counsel for the United States and Security shall seek to resolve their differences within thirty (30) days. In the event that the parties cannot agree, any dispute regarding the proposed customer assistance program will be submitted to the Court within fifteen (15) days to rule on same. If, within thirty (30) days after receipt of the proposed customer assistance program, counsel for the United States has no objection, counsel shall so inform Security in writing.

   3. During the term of this Judgment, if Security wishes to modify or alter the customer assistance program, Security shall submit the proposed changes in writing to counsel for the United States for review and approval.

7. IV.
   1. Information provided to the Federal Reserve by the bank reveals that between the period of October 1, 1991, and October 31, 1993, non-Hispanics paid an average APR of 15.06% for an unsecured loan, and an average APR of 13.20% for a secured consumer loan (non-mortgage). The bank also has identified Hispanics (by surnames) who received comparable loans during this period. Each such Hispanic customer who paid an APR that was higher than the average APR paid by non-Hispanic customers will be deemed to have been aggrieved by the discriminatory pricing practices, and will be entitled to compensation pursuant to the terms of this Judgment. The United States estimates that there were approximately three hundred and thirty (330) incidents wherein Hispanic borrowers were charged more than the non-Hispanic average, but some Hispanic borrowers were involved in more than one incident.

   2. Within twenty (20) days of entry of this Judgment, Security will provide the United States with a list of those aggrieved persons as described in paragraph A of this Section.

   3. Security will make available any and all documentation of the information necessary to meet the requirements of Paragraph B above if requested by the United States. The United States shall also, upon reasonable notice to Security, have access to Security's records and files to verify the accuracy of the list. The final list of aggrieved persons shall be subject to approval of the United States.

   4. Within forty-five (45) days after entry of this Stipulated Judgment, Security shall notify by letter all aggrieved persons on the list by certified mail, return receipt requested. The notification letters, the form of which shall be subject to approval by the United States within five (5) days of entry of this Judgment, shall be accompanied by a blank release of all claims in the form of Attachment A. The notification letter and the release of all claims shall be written in both Spanish and English. Security shall promptly forward a copy of each release received pursuant to this paragraph to counsel for the United States upon receipt.

   5. no aggrieved person shall be paid any compensation until after execution of a written release of all claims.

   6. Twenty (20) days after the mailing of the notification letters, Security shall report to counsel for the United States those names and addresses for whom no return receipt card has been obtained. Security shall take reasonable steps within the following sixty (60) days to locate such persons, and shall document such efforts. The United States may also take steps to locate such persons.

   7. Security shall set aside five hundred thousand dollars ($500,000) (compensation fund), to be distributed, pursuant to the provisions set forth in Paragraph H below to each aggrieved person on the list who delivers to Security an executed release within sixty (60) days after receipt of a notification letter. With respect to persons located by the United States, Security shall similarly issue checks to each such aggrieved person who delivers an executed release within sixty (60) days after receipt of a notification letter and a blank release. All checks shall be issued and mailed, by certified mail, return receipt requested, within five (5) business days after receipt of an executed release.

   8. The monetary amount set forth in Paragraph G above shall be distributed as follows:
      1. Each aggrieved person who was involved in at least one incident as described in Paragraph A above, shall receive one share of the compensation fund;

      2. Each aggrieved person who was involved in two or more incidents as described in Paragraph A above, shall receive, as additional compensation, one-half share of the compensation fund; and

      3. The number of shares into which the compensation fund shall be divided shall equal the number of aggrieved persons increased by one-half for each aggrieved person involved in two or more incidents.

8. V.

   Within thirty (30) days after the date of entry of this Stipulated Judgment, Security shall pay the sum of ten thousand dollars ($10,000) by check payable to the Treasurer of the United States of America as a civil money penalty.

9. VI.

   This Stipulated Judgment shall remain in effect for two (2) years.

   1. During the period of this Stipulated Judgment, Security will retain all application files submitted for consumer loans and all documents and notices relevant to any decisions regarding such loans, including any documents relating to the terms of any such loans. Security will retain all records relating to its compliance with this Stipulated Judgment.

   2. Upon reasonable notice to counsel for defendant, representatives of the United States shall be permitted to inspect and copy all pertinent records of defendant at any and all reasonable times; provided, however, that the United States shall endeavor to minimize any inconvenience to defendant from inspection of such records.

   3. Every six months during the term of this Stipulated Judgment, defendant shall serve by first class mail, postage prepaid, upon counsel for the United States, six-month reports. Such reports shall include the name, address, telephone number, and national origin of all persons who have applied for a consumer loan, whether such applications were approved or denied, and for each approved loan, the loan number, initial principal amount, APR, date of origination, maturity date, whether the loan was installment or single payment, whether the loan was secured or unsecured, the manner in which the interest rate on the loan was calculated, and the total cost of the loan for each borrower.

10. VII.

    This action is dismissed without prejudice to the right of either party to approach the Court regarding matters of noncompliance with the terms of this Judgment. The parties to the Judgment will endeavor in good faith to resolve informally any differences regarding interpretation of and compliance with this Judgment prior to bringing such matters to the Court for resolution.

11. VIII.

    Each party to this litigation will bear its own costs.

It is so ORDERED this _____ day of _________________, 1995.

UNITED STATES DISTRICT JUDGE

It is so agreed by the parties.

For the United States:

JANET RENO
ATTORNEY GENERAL
DEVAL L. PATRICK
ASSISTANT ATTORNEY GENERAL
PAUL F. HANCOCK
Chief, Housing and Civil Enforcement Section
BRIAN F. HEFFERNAN
SUNNY E. PIETRAFESA
Attorneys, Housing and Civil Enforcement Section
Civil Rights Division
U.S. Department of Justice
202-616-2217

JAMES H. DeATLEY
UNITED STATES ATTORNEY
RAYMOND A. NOWAK
Texas Bar No. 15121490
Assistant U.S. Attorney
601 N.W. Loop 410, Suite 600
San Antonio, Texas 78216
210-308-3610

For the Defendant:

WILLIAM M. KERR
Kerr, Fitzgerald & Kerr
P.O. Box 511
Midland, Texas 79702
915-683-5291

STATE OF TEXAS

COUNTY OF REEVES

WHEREAS, I, [Releasor name] understand that the United States Department of Justice ("United States") has conducted an investigation of Security State Bank of Pecos ("Security State") and has concluded that Security State has violated provisions of the Equal Credit Opportunity Act;

WHEREAS, I have applied for and received (a) consumer loan(s) with Security State;

WHEREAS, I understand that I might be entitled to damages if the United States were successful in a lawsuit against Security State;

WHEREAS, I further understand that the parties have agreed that, in order to avoid protracted and costly litigation, the matter should be resolved by a Stipulated Judgment if the United States secures General Releases from me and from certain other consumer loan borrowers;

THEREFORE, contingent upon the United States securing General Releases from me and others, and contingent upon entry of a Consent Decree, I agree to the following:

In consideration of _______________________________ dollars to be paid to me, I, [Releasor name], hereby agree, effective upon receipt of payment, to release Security State and its current, former, and future officers, directors, employees, agents, parent companies, affiliates, and successors-in-interest from all legal and equitable claims or causes of action that have or might have been asserted by me or the United States as of the date of execution of this General Release that arise out of any alleged discrimination on the basis of national origin with respect to any consumer loan(s) I received from Security State.

I acknowledge that I understand my right to pursue my own legal action instead of participating in this settlement.

I waive any claims I may have against the United States arising out of this action.

This General Release constitutes the entire agreement between Security State, the United States, and me, without exception or exclusion.

I have read this release and understand the contents hereof and I execute this release of my own free act(s) and deed(s).

Signed this __________ day of ______________________, 1995.

__________________________________

[name]

SWORN TO AND SUBSCRIBED

before me on the ________ day of ____________, 199__.

(SEAL)

1. For purposes of this Order, counsel for the United States is Chief, Attn: (DJ #188-76-2), Housing and Civil Enforcement Section, Civil Rights Division, United States Department of Justice, P. O. Box 65998, Washington, D.C. 20035-5998.