In another blow to the scandal-plagued bank, the City of Philadelphia is suing Wells Fargo & Co., accusing the bank of violating of the federal Fair Housing Act by discriminating against minority applicants applying for mortgages.
The city is accusing Wells Fargo of having offered minority buyers higher-cost, riskier loans than white borrowers, even if they qualified for loans with better terms. Not only that, but the bank allegedly refused to let minority buyers refinance those high-risk loans with loans offering lower interest rates or otherwise easier terms.
Philadelphia’s complaint alleges that between 2004 and 2014, African American buyers were twice as likely to receive high-cost loans when compared to white borrowers with similar credit histories. Latino borrowers were just slightly less likely to receive high-risk loans than African American buyers.
An analysis by the city found that 23 percent of Wells Fargo’s loans to minority customers in Philadelphia were high-cost or high-risk, compared with 7.6 percent of loans made to whites.
The lawsuit says that Wells Fargo is among a group of major banks with a “history of redlining” in Philadelphia that goes back to the 1930s.
Redlining is the practice of refusing or limiting loans or insurance in certain neighborhoods based on racial or ethnic composition without regard to residents’ qualifications or creditworthiness.
“The resources of the city and the lives of Philadelphia’s citizens have been negatively affected by Wells Fargo’s discriminatory lending practices,” Philadelphia City Solicitor Sozi Pedtro Tulante said in a statement.
Mayor Jim Kenney added, in a statement of his own, “The practices of Wells Fargo disproportionately affected minority borrowers here in Philadelphia. And because many of these loans resulted in foreclosures, all neighborhoods throughout the City suffered the harm.”
For its part, Wells Fargo said the allegations in the lawsuit are not true. “The city’s unsubstantiated accusations against Wells Fargo do not reflect how we operate,” Wells Fargo spokesman Tom Goyda said in a statement. “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 waited to initiate its lawsuit until a recent decision by the Supreme Court that cities have appropriate grounds to sue banks for predatory lending practices because those activities cause financial harm by leading to lower property taxes and requiring the city to provide services to borrowers who are having trouble paying off those loans.
Photo: Roman Tiraspolsky / Shutterstock.com