JENNIFER McDERMOTT
Associated Press

PROVIDENCE, R.I. (AP) — Santander Bank has agreed to give $1.3 million in grants to support low- and moderate-income neighborhoods in Providence to resolve a lawsuit filed by the city.

The city sued in federal court in May, alleging the institution engaged in discriminatory practices by deliberately limiting its lending in minority neighborhoods while expanding in predominantly white areas.

Mayor Angel Taveras says it will benefit the city more to have Santander as a partner than an adversary. The city dropped the lawsuit and announced the grants this week.

“We can accomplish more by working together than by fighting,” he said. “They want to be an active participant in the city of Providence and this is their commitment to showing it. It’s a good step forward.”

The bank, the U.S. subsidiary of Spain’s Banco Santander SA, agreed to contribute to financial literacy programs, a mixed-use development project and a new program to award grants for mortgage down payments and closing costs. Taveras said there will be $500,000 in grants for new homebuyers, which will help many Providence residents.

Santander said in a statement that it looks forward to working with the city to strengthen the community. Nancy Orlando, a Santander spokeswoman, said Friday she could not comment on the lawsuit.

In its suit, the city said the annual number of mortgages by Santander in white areas of Providence from 2009 to 2012 increased 25 percent compared with 2006 and 2007, but it decreased 63 percent in minority neighborhoods, a practice known as “redlining.” Insufficient credit was suppressing home prices and preventing community development corporations from rehabilitating vacant properties, the city argued.

When it was filed, Santander said it rejected the accusation but was willing to work with the city to allay its concerns.

Taveras said he expects the bank to make more loans to qualified people in minority neighborhoods. While $1.3 million is a “good start,” he said, the city needs to make sure loans are made.

“This is about getting people into homes and making sure they have the chance to live the American dream,” he said.

What is now Santander’s U.S. unit was formerly known as Sovereign Bank. It has been owned by Banco Santander since 2009.

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