Citizens Bank has agreed to settle a federal lawsuit over allegations that it systematically denied loans to African-American neighborhoods in Detroit. Under the settlement, the bank will spend $3.6 million on grants and loans to African-American households.

“This type of discrimination is part of the web of intolerable practices that stripped vast amounts of wealth from communities of color in the last decade,” Thomas E. Perez, Assistant Attorney General in charge of the Justice Department’s Civil Rights Division, said in a press release.

In a lawsuit, the Justice Department alleged that Flint-based Citizens Republic Bancorp, which operates as Citizens Bank, avoided giving loans in Detroit and the suburbs of River Rouge, Inkster and Romulus, all of which are predominantly African-American.

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“It's good news the [Department of Justice] is cracking down on practices like this,” says Kathleen Day, spokeswoman for the Center for Responsible Lending, “but it's very sad—and bad for everyone, whatever their skin color—that this type of behavior persists.”

To settle the suit, Citizens bank agreed to invest $1.5 million in loans in areas around Detroit that are majority African-American. Another $1.6 million will go toward a neighborhood stabilization program that gives homeowners grants of up to $5,000 toward fixing up the exteriors of their homes. In addition, Citizens will spend $500,000 to promote these programs in the community and to run consumer financial education programs.

The settlement still must be approved by a federal judge.

Image: Brian Turner, via Flickr