UPDATE 1-U.S. Justice Dept launches new discriminatory lending initiative

(Adds comments, details of measures, context, byline)

By Pete Schroeder

WASHINGTON, Oct 22 (Reuters) - The U.S. Department of Justice is launching a nationwide initiative to combat discriminatory lending practices, Attorney General Merrick Garland said on Friday.

Garland said the illegal practice of "redlining," or avoiding lending to minority neighborhoods, remained a persistent problem, and the federal government was devoted more resources to identifying it and punishing lenders.

"Today, we are committing ourselves to addressing modern-day redlining by making far more robust use of our fair lending authorities," he said. The new initiative will tackle fair lending issues "on a broader geographic scale than the Justice Department has ever done before," he added.

Specifically, Garland said authorities nationwide are partnering with banking and consumer regulators, including the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency, which monitors national banks.

The government already has several fair lending probes open, and expects more to come shortly, he said.

Garland also announced the first settlement under the initiative, of $8.85 million, with Tennessee's TrustMark National Bank, which the government said avoided offering home loans in predominantly Black and Hispanic neighborhoods.

Officials said they would focus on modern ways lenders could discriminate against borrowers. Rohit Chopra, director of the Consumer Financial Protection Bureau, singled out "digital redlining disguised through so-called neutral algorithms."

"Algorithms can help remove bias, but black box underwriting decisions are not necessarily creating a more level playing field," he said at the announcement. "We will not allow robo-discrimination to proliferate." (Reporting by Pete Schroeder; Writing by Chris Gallagher; Editing by Richard Chang)