Friday, March 1, 2024

Wells Fargo accused of discriminatory practices against Latinos and African Americans

According to a federal lawsuit that cites former employees, Wells Fargo discriminated against black and Latino homebuyers in Sacramento, California, by pushing them into more expensive mortgages than white borrowers.

“Wells Fargo’s discriminatory lending practices place vulnerable, underserved borrowers in loans they cannot afford,” said the lawsuit, which was filed Friday.

The city of Sacramento said that four anonymous former mortgage employees at Wells Fargo confirm that the bank “intentionally steered minority borrowers into higher cost loans because of their race or ethnicity.” Black Wells Fargo borrowers in Sacramento with credit scores above 660 are 2.8 times more likely to receive a high-cost or high-risk loan than comparable white borrowers and Latino borrowers were 1.8 times more likely, the suit said.

Sacramento is not the first city to point the finger at Wells Fargo. Last year, Philadelphia filed a similar lawsuit, citing former employees who alleged the bank encouraged workers to push the use of higher-cost loans to minorities. Baltimore and Miami have also accused the bank of discriminatory mortgage lending.

The former employees said they were instructed to offer “lender credits” to borrowers in minority neighborhoods. These credits increase the cost of a loan in exchange for the bank paying closing costs, making the overall cost of the mortgage more expensive.

The lawsuit claimed that Wells Fargo took advantage of the language barrier with Spanish-speaking borrowers. It quoted a former employee who said that while Wells Fargo advertised for mortgages in Spanish, it did not produce translated paperwork to sign, even when the transaction was handled in Spanish. Another employee said that loan officers were likely to charge a higher rate to borrowers with “Mexican names”.

“Wells Fargo deliberately created an incentive program that induced minority borrowers to take higher cost loans under terms that they did not understand,” the lawsuit said.