Top U.S. bank Wells Fargo is to pay $175 million to resolve allegations that it charged African-American and Hispanic borrowers higher fees and interest rates than whites, the Justice Department said Thursday.
The bank is accused of engaging “in a pattern or practice of discrimination against qualified African-American and Hispanic borrowers in its mortgage lending from 2004 through 2009.”
Customers were also steered toward riskier sub-prime loans, while their white peers received standard loan terms, according to the Justice Department.
“An applicant’s creditworthiness, and not the color of his or her skin, should determine what loans a borrower qualifies for,” said Deputy Attorney General James Cole.
The San Francisco-based bank denies the claims, according to a statement Wednesday, but said it was settling to avoid litigation.
The bank will pay $125 million in compensation to around 4,000 customers who paid higher fees than white borrowers. It will also pay $50 million in direct aid to communities hard hit by the housing crisis. Raw Story
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“Today’s settlement with Wells Fargo is the second largest fair lending settlement in the department’s history,” Assistant Attorney General Thomas E. Perez announced.
The city of Baltimore, Maryland had filed a lawsuit against Wells Fargo in January 2008. Under the terms of the settlement announced on Thursday, the city will dismiss the suit. Digitaljournal.com
Wells Fargo currently originates more than a third of all U.S. mortgages, more than the combined total of the next seven biggest home lenders. In a statement Thursday, it denied the government’s claims and said it was settling the case to avoid prolonged litigation with the Justice Department. LA Times
This is at least the third time in the past year that a major bank has settled with the Feds to resolve allegations of racist practices. In May, SunTrust Bank’s mortgage subsidiary settled for $21 million. In December, Bank of America paid $335 million because of reported discrimination by Countywide Financial, which it purchased in 2008. sfweekly.com