Two AIG units settled federal charges that they discriminated against blacks in providing home loans and will pay at least $7.1 million for restitution and education efforts, according to court documents filed on Thursday.

The units, AIG Federal Savings Bank and Wilmington Finance Inc, will provide $6.1 million to borrowers who were affected by the alleged discrimination, according to a consent order filed in U.S. District Court in Delaware.

They will also provide at least $1 million to organizations that provide credit counseling, financial literacy and other educational programs that target blacks, according to the documents.

American International Group Inc , which received a $182.3 billion government bailout amid the 2008 financial crisis, said in a statement that it denied the government's allegations and that the two units did not condone discriminatory conduct.

We are pleased to have reached an agreement with the government to resolve the issues in the complaint, as well as to avoid the distractions and burdens of protracted litigation over contentious issues, the company said.

The charges resulted from examinations in 2006 and 2007 by the Office of Thrift Supervision, which referred concerns about AIG's practices to the Justice Department for enforcement action.

The department charged that the units engaged in a pattern or practice of discrimination on the basis of race or color by allowing wholesale mortgage brokers to charge higher direct broker fees to African-American borrowers than to white borrowers for loans originated and funded by the units.

The companies, which have ended their wholesale home mortgage lending operations and do not plan to re-enter that line of business, also agreed to monitoring programs, the consent order said.

(Additional reporting by Paritosh Bansal in New York; Editing by Robert MacMillan and John Wallace)

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