More than 500 Hispanic and African-American borrowers will receive refunds from Massachusetts community bank which the U.S. Department of Justice had accused of charging minority clients more than their white counterparts.

Lowell-based Sage Bank, which had denied any wrongdoing and insisted that it did not intentionally discriminate against the borrowers, will spend $1.2 million to settle the allegations, the Boston Globe reported. The relatively small financial institution has less than $200 million in assets, the newspaper detailed.

Under the bank's pricing policy, loan officers were assigned a "target price" they were required to achieve on each home loan, regardless of a borrower's creditworthiness, the Justice Department noted in a statement. Loan officers who disproportionately served Hispanic and African-American borrowers were generally assigned higher target prices, the department claimed in its complaint.

Principal Deputy Assistant Attorney General Vanita Gupta, the head of the Justice Department's Civil Rights Division, underlined the ensuing risk of discrimination as he announced the settlement.

"Sage Bank's loan pricing policies created the risk that borrowers would be treated differently based on impermissible characteristics like race and national origin, and that was in fact the result," Gupta said. "This settlement ensures that all potential borrowers will be treated equally, regardless of race and national origin, and Sage Bank has agreed to restructure and monitor its lending practices to ensure that it is meeting those obligations."

U.S. Attorney Carmen Ortiz of the District of Massachusetts, meanwhile, claimed that the bank's approach was particularly unacceptable because it affected core American values.

"Sage Bank's discriminatory practices were aimed at some of our most vulnerable neighborhoods and populations," Ortiz said. "Home ownership is the foundation of the American dream, and we will continue our work to ensure that all people - regardless of their skin color or the language they speak - have equal access to that dream."