(Adds settlement details, Bank of America comment, NEW YORK dateline, bylines)
By Chris Prentice and Jonathan Stempel
WASHINGTON/NEW YORK, July 23 (Reuters) - Bank of America Corp agreed on Thursday to settle U.S. Department of Justice claims it illegally denied mortgages and home equity loans to adults with disabilities who were under legal guardianships or conservatorships.
The second largest U.S. bank had adopted the lending policy in January 2010 in response to the global financial crisis, to protect "at-risk" loan applicants from being exploited.
But the Justice Department said the policy, which the Charlotte, North Carolina-based bank has discontinued, amounted to disability discrimination under the federal Fair Housing Act.
Bank of America agreed in the settlement to pay $4,000 to compensate each affected loan applicant, with payments expected to total about $300,000, the Justice Department said.
The bank denied liability in agreeing to the settlement, which requires approval by a federal judge in Brooklyn.
Bank of America ended the policy for mortgages in 2016 and for home equity loans in 2017.
In a statement, Bank of America said it has an "outstanding record" of supporting clients and employees with disabilities, and its Disability Advisory Council works to improve strategy.
According to court papers, the Justice Department began probing the bank's lending practices in December 2016, and advised in September 2019 it had been authorized to file a complaint. (Reporting by Chris Prentice in Washington and Jonathan Stempel in New York; Editing by Leslie Adler and Jonathan Oatis)