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Wells Fargo’s Disgraceful Discrimination Scandal: A Guide
The bank ponies up $175 million to settle accusations that it charged blacks and Latinos higher interest rates and fees on their mortgages
A customer leaves a Wells Fargo Bank branch office July 12: The bank is accused of charging higher fees and interest rates for some 30,000 minority borrowers across 36 states. Photo: Justin Sullivan/Getty ImagesSEE ALL 44 PHOTOS
This week, Wells Fargo agreed to pay $175 million to settle charges that it discriminated against thousands of blacks, Latinos, and other minority borrowers between 2004 and 2009. The Justice Department had accused Wells Fargo, the country's largest mortgage lender, of charging minority borrowers higher interest rates and fees on home loans than it charged white borrowers with similar credit ratings. Thomas Perez, an assistant attorney general at the department, slammed Wells Fargo for levying the equivalent of a "racial surtax." People "should be judged by the content of their creditworthiness and not the color of their skin," he said. Here, a guide to the case:
What exactly did Wells Fargo do?
The Justice Department says Wells Fargo engaged in a pattern of "systemic discrimination" in which some 30,000 minority borrowers across 36 states were charged higher fees and interest rates than their white counterparts. A black borrower in Chicago, for example, paid an average of nearly $3,000 more in fees than a white applicant who had the same credit rating. A Latino borrower paid more than $2,000 extra. The average "surtax" for a black borrower in the Miami area in 2007 was $3,657. In addition, Wells Fargo steered some 4,000 minority borrowers with good credit toward subprime loans — which are usually reserved for those with shaky credit, and have interest rates that often spike after several years.
What does Wells Fargo say now?
Though it's coughing up a massive settlement, the bank did not officially admit wrongdoing, and claims that it settled the case "solely for the purpose of avoiding contested litigation" with the government. The bank stopped issuing subprime loans in 2008.
