Wells Fargo Allegedly Steered Blacks and Latinos to Costlier Mortgages

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Summary: The city of Philadelphia has slapped Wells Fargo with a discrimination lawsuit.

Wells Fargo has a history of mistreating its customers, and a new lawsuit filed Monday adds more to the bank’s resume of bad acts.

  

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The city of Philadelphia sued Wells Fargo on Monday for allegedly violating the Fair Housing Act of 1968. According to The Los Angeles Times, Wells Fargo was accused of “steering” black and Latino mortgage seekers towards costlier and riskier home loans than what was offered to whites.

The allegations in the complaint are both shocking and not, considering the bad reputation the bank has earned because of last year’s scandal. In early September of 2016, the Consumer Financial Protection Bureau (CFPB) fined the bank $100 million for a scheme that resulted in over 1.5 million fake accounts being created using real customers’ information without their knowledge. These fake accounts accrued fees that the real customers’ paid, and they boosted sales numbers for the shady employees who made them.

Wells Fargo told CNN Money last year that it had fired numerous employees over the years who were caught, but the federal government alleged that the bank was set up to encourage this type of behavior by enforcing unrealistic sales goals.

After the scandal broke, Wells Fargo issued a statement, acknowledging fault.

“We regret and take responsibility for any instances where customers may have received a product that they did not request,” Wells Fargo said.

The account creation scheme occurred between 2011 to 2015, a time that overlapped with the alleged redlining scandal filed by Philadelphia. According to the lawsuit, Wells Fargo, along with other major banks in the City of Brotherly Love, gave African-American and Latino borrowers more expensive loans than whites with similar credit. This allegedly took place between 2004 and 2014.

The lawsuit said that African-Americans were twice as likely to receive high-cost loans compared to white borrowers with similar financial backgrounds, and Latino applicants were 1.7 times as likely to be offered higher mortgages compared to similar white borrowers.

Wells Fargo told The Los Angeles Times in a statement that the allegations are “unsubstantiated.”

“The city’s unsubstantiated accusations against Wells Fargo do not reflect how we operate in Philadelphia and all of the communities we serve,” Wells Fargo spokesman Tom Goyda said. “Wells Fargo has been a part of the Philadelphia community for more than 140 years and we will vigorously defend our record as a fair and responsible lender.”

Philadelphia’s lawsuit has arrived two weeks after the U.S. Supreme Court ruled on a case between Miami and Bank of America. Miami had sued Bank of America for discriminatory lending practices, and the city alleged that their behavior led to higher rates of defaults for minority mortgage borrowers. The U.S. Supreme Court ruled in favor of Miami, and it concluded that cities may sue banks for predatory lending practices.

Benjamin Field, deputy city solicitor for Philadelphia, said that the city had been investigating the alleged redlining practice for a year, but that they had waited for the Supreme Court decision before filing their lawsuit.

In 2012, Wells Fargo had settled a similar complaint from the Department of Justice for $175 million. In that matter, Wells Fargo also denied discriminating against minorities, and they said they paid the sum only to avoid costly litigation.

• Related: Wells Fargo Employees Caught Creating a Million Fake Accounts to Collect Fees 
• Related: $62.5 Million Settlement Approved in Case Against Wells Fargo 
• Related: Wells Fargo Settles Fake Account Lawsuit 

Source: Los Angeles Times

Photo courtesy of U.S. News and World Report

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