Wells Fargo was sued in 2022 for xenophobic hiring and lending practices. Despite the settlement, the bank still denies any wrongdoing.
Wells Fargo has settled a four-year discrimination lawsuit in which the bank’s board of directors was accused of allowing exclusive hiring and lending practices.
The bank’s shareholders, employees, and job applicants filed a lawsuit in September 2022, alleging that the bank failed to enforce diversity, equity, and inclusion (DEI) measures and that its lending algorithms led to disproportionate mortgage denials to minority borrowers. The plaintiffs argued that the board was aware of the problem but refused to fix it.
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A Bloomberg investigation corroborated the plaintiffs’ claims, finding that 2020 Mortgage Disclosure Act data revealed that Wells Fargo rejected refinance applications from Black homeowners at higher interest rates than they accepted. The bank approved 47% of black homeowners’ refinance applications, but the interest rate was 33% lower than the average rate at other large financial institutions.
“Nationwide, only 47 percent of Black homeowners who completed refinance applications with Wells Fargo in 2020 were approved, compared to 72 percent of white homeowners,” the report says. “Although black applicants had lower approval rates than white applicants at every major financial institution, the data showed that Wells Fargo had the widest disparity, and was the only one that rejected more black homeowners than it accepted.”
Wells Fargo still denies wrongdoing, but it has created a three-year, $100 million mortgage assistance program for borrowers in disenfranchised communities. The bank also plans to pay shareholders $10 million.
“Defendants are entering into this provision solely for settlement purposes and to avoid the cost, confusion and uncertainty of further litigation,” court documents say. “Defendants agree that this action was brought in good faith and on a genuine basis, is not frivolous, and is resolved voluntarily.”
Wells Fargo added in a statement to Realtor.com, which reported the news Thursday, that it is “pleased to have reached a settlement.”
Wells Fargo is not the only lender facing discrimination claims. Navy Federal, Fannie Mae, Rocket Mortgage and Solidify also face allegations that they targeted borrowers and employees of color during the hiring and lending process.
These cases are still proceeding in court.
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