Wells Fargo, facing a federal Department of Justice lawsuit for discriminatory lending practices, has settled for $175 million, arguing that it was innocent but had decided not to fight the case.
The justice department examined over 34,000 loans that Wells Fargo made to borrowers nationwide. The government investigation found that loans submitted to Wells Fargo by mortgage brokers had varied interest rates, fees, and costs based only on race,
In its lawsuit, a Deputy Attorney General stated that the applicant’s creditworthiness, and not the color of his or her skin, should determine how much it costs for borrowers to borrow money.
At a news conference, Deputy Attorney General James Cole said the bank’s discriminatory lending practices resulted in more than 34,000 African-American and Hispanic borrowers in 36 states and the District of Columbia paying higher rates for loans solely because of the color of their skin.
Wells Fargo denies that it did anything wrong.
In an official statement, the nation’s largest mortgage lender stated: “Wells Fargo is settling this matter solely for the purpose of avoiding contested litigation with the DOJ, and to instead devote its resources to continuing to provide fair credit services and choices to eligible customers and important and meaningful assistance to borrowers in distressed U.S. real estate markets.”
In many cases, African American and Latino homeowners paid higher interest rates than whites, for no reason other than their race. In other cases, they were charged exorbitant fees, which an Assistant Attorney General labeled a “racial surtax.”
Of that $175 million settlement, $125 million will go to borrowers and the remaining $50 million will be in the form of down-payment assistance in locations where discrimination was prominent.
The hardest hit areas identified include Washington, D.C., Chicago, Philadelphia, New York City, Cleveland, Baltimore, and three cities in California: Riverside, Oakland and San Francisco.