CHICAGO (AP) – A Chicago-area bank that federal prosecutors say illegally avoided doing business in minority neighborhoods has agreed to open branches and invest nearly $6 million in predominantly black and Hispanic communities to settle a federal discrimination lawsuit, authorities announced Tuesday.

The suit alleged that First American Bank engaged in a practice called redlining, where loans and other services were denied in black and Hispanic neighborhoods in and around Chicago and in the Kankakee area.

“No one should be denied access to a loan to buy a home or a car or to start a business because of where they live,” said Steven Rosenbaum, a top official in the Justice Department’s civil rights division who appeared with U.S. Attorney Patrick Fitzgerald at a Tuesday new conference. “But that’s what’s happened here.”

As part of the settlement, First American Bank must in five years invest $5 million in a special financing program to offer residents and small businesses in predominantly minority areas subsidized interest rates. The rates would be at least a half percentage point below what the bank would normally charge – a move Fitzgerald said would result in an “additional approximately $80 million in loans in those areas.”

The settlement also calls for the bank to spend at least $400,000 to advertise its services in predominantly minority areas and another $300,000 on a consumer education program in those areas.

By the end of the year, the bank also must open three branches in predominantly black areas – two in Chicago and one in Matteson. Another branch in a predominantly Hispanic area must be opened within three years.

A judge must approve the settlement.

Tuesday’s settlement stems from an investigation that was prompted by a Federal Reserve Board examination.

According to federal authorities, bank officials made statements indicating that its business practices were based on racial stereotypes, including that it did not provide a full range of services to minorities because they “equated making loans in low income or minority neighborhoods with making bad loans.”

“As a result, in predominantly minority neighborhoods the bank provided ready access to money only through cash dispensing machines,” said Rosenbaum. “But in white neighborhoods the bank offered all of its services, including loans needed for homes or cars.”

Fitzgerald said First American has already started taking corrective measures. A spokesman for Fitzgerald, Randall Samborn, said in reaching the settlement the bank did not admit any legal wrongdoing.

A spokeswoman for the bank did not immediately return a call for comment from The Associated Press. Federal authorities described the bank as Carpentersville-based, while the company’s Web site said it was based in the Chicago suburb of Elk Grove Village.

Tuesday’s settlement was the second such settlement in the Chicago area in 18 months.

In December 2002, federal authorities announced an agreement with suburban Chicago-based Mid America Bank to invest more than $10 million and open two branches in minority neighborhoods to settle another federal discrimination lawsuit.