Republican lawmakers are questioning the U.S. Department of Justice over their recent settlements with Bank of America Corp (NYSE:BAC) and Citigroup Inc (NYSE:C) earlier this summer.

At issue are required donations to so-called left-wing “activist groups,” according to a report in The Wall Street Journal. The settlement was designed to help homeowners avoid foreclosure, but a letter from Rep. Bob Goodlatte of Virginia and Rep. Jeb Hensarling of Texas, questions apparent preferential  treatment given to some of the nonprofits, such as National Council of La Raza and NeighborWorks America.

Republicans Complain About DoJ BOfA & Citigroup Settlement

Bank of America and Citigroup settlement a vehicle for funding activist groups

“The settlements appear to serve as a vehicle for funding activist groups rather than as a means of securing relief for consumers actually harmed,” Mr. Goodlatte, who is chairman of the House Judiciary Committee, and Mr. Hensarling, who is chairman of the House Financial Services Committee, wrote in the letter reviewed by the Journal.  They note Bank of America and Citigroup get extra credit toward meeting their consumer-relief obligations by donating to these “activist groups,” receiving $2 in credit for every $1 donated. The banks receive less credit for providing financial assistance to forgive mortgage principal for underwater homeowners whose mortgages exceed the value of the house.

Congressmen want to understand who decides the terms of the settlement agreement relative to donations to the “activist groups,” and if the banks received any guidance as to which particular non-profits should receive donations. The bank donations to such groups are a relatively minor aspect of the settlements. For instance, Bank of America Corp (NYSE:BAC) out of the $7 billion total settlement, Bank of America is required to donate at a minimum of $20 million to the housing-counseling agencies. Citigroup Inc (NYSE:C), for its part, was fined $2.5 billion and must donate at least $10 million.

Bank of America and Citigroup to pay penalty in form of consumer relief

Ironing out staggering mortgage-securities settlements can be problematic, the report noted, as both consumer advocates and banks have each registered their own complaints. The banks would like to pay a greater proportion of their total penalty in the form of consumer relief, which they say benefits consumers more directly and at the same time can be more generous to a bank’s profits, as it helps bailout their own troubled loans among other issues.  Housing advocates, on the other hand, complain that providing direct relief to troubled loans provides banks credit for actions they were going to undertake anyway, potentially in the form of writing off a loan. They also say such assistance does not always find its way to those who need it most.