“I am sorry there will be no “perp walk” for the top executives so we can see their faces. I know that if someone in my neighborhood robs a bank, they go to jail. But if a bank robs my neighborhood, nobody goes to jail,” said Rep. Luis V. Gutierrez (D-IL), the Ranking Democrat on the Housing, Insurance, and Community Opportunity Subcommittee in the U.S. House of Representatives.
According to the Department of Justice, the proposed settlement provides for an independent administrator to contact and distribute payments of compensation at no cost to borrowers whom the Justice Department identifies as victims of Wells Fargo’s discrimination.
The United States’ complaint alleges that African-American and Hispanic wholesale borrowers paid more than non-Hispanic white wholesale borrowers, not based on borrower risk, but because of their race or national origin. Wells Fargo’s business practice allowed its loan officers and mortgage brokers to vary a loan’s interest rate and other fees from the price it set based on the borrower’s objective credit-related factors. This subjective and unguided pricing discretion resulted in African-American and Hispanic borrowers paying more. The complaint alleges that Wells Fargo was aware the fees and interest rates it was charging discriminated against African-American and Hispanic borrowers, but the actions it took were insufficient and ineffective in stopping it.
Congressman Gutierrez said that the verdict helped demonstrate that the systematic practice of discriminating against minorities is a very expensive, and ultimately unprofitable, way of doing business, and that he is glad that now every bank executive knows that.
“I am obviously pleased that systemic discrimination against black and Hispanic borrowers is being addressed. Charging people of color higher fees and steering them towards riskier categories of loans is outrageous and the creation of the Consumer Financial Protection Bureau (CFPB) is a concrete step we took to protect consumers from predatory practices. I will continue to defend the CFPB against Republican efforts to destroy or neuter it precisely because it was designed to bring discriminatory practices like these to light. We need to continue to make homeownership available in minority communities and ensure that fair lending practices are followed because home ownership is what builds stable, vibrant, and successful neighborhoods,” Gutierrez stated.
The settlement, which is subject to court approval, was filed today in the U.S. District Court for the District of Columbia in conjunction with the department’s complaint, which alleges that between 2004 and 2008, Wells Fargo discriminated by steering approximately 4,000 African-American and Hispanic wholesale borrowers, as well as additional retail borrowers, into subprime mortgages when non-Hispanic white borrowers with similar credit profiles received prime loans. All the borrowers who were allegedly discriminated against were qualified for Wells Fargo mortgage loans according to Well Fargo’s own underwriting criteria.
The United States also alleges that, between 2004 and 2009, Wells Fargo discriminated by charging approximately 30,000 African-American and Hispanic wholesale borrowers higher fees and rates than non-Hispanic white borrowers because of their race or national origin rather than the borrowers’ credit worthiness or other objective criteria related to borrower risk.
“By reaching a settlement in this case, African-American and Hispanic wholesale borrowers who received subprime loans when they should have received prime loans or who paid more for their loans will get swift and meaningful relief,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “As one of the largest mortgage lenders in the country, Wells Fargo’s commitment to conduct an internal review of its retail lending and compensate African American and Hispanic retail borrowers who may have been improperly placed in subprime loans is significant. We will continue to work aggressively to ensure that all qualified borrowers have access to credit on an equal basis.”
The Department of Justice will make a public announcement and post contact information on its website once an administrator is chosen. Borrowers who are eligible for compensation from the settlement will then be contacted by the administrator. Individuals who believe that they may have been victims of lending discrimination by Wells Fargo and have questions about the settlement may email the department at email@example.com