Jul 18, 2012
Wells Fargo's $175 Million Settlement for Racist Lending Isn't Nearly Enough
Bank charged higher fees and rates to more than 30,000 minority borrowers
Racism is alive and well at major banking institutions across the country, even if they don’t have to admit it.
In June 2009, Wells Fargo CEO John Stumpf told the Charlotte Observer, “We absolutely do not tolerate discrimination. We do not use race in our underwriting criteria.” Last week, the bank paid $175 million to settle a claim that they did discriminate and did use race in their underwriting criteria. While the bank will pay the money, as part of their settlement they admit no wrongdoing.
Unfortunately for the thousands of African American and other minority customers Wells Fargo ripped off with its subprime loans, their paltry settlement doesn’t settle anything. The $175 million Wells Fargo agreed to pay Thursday is the second-largest fair lending settlement in the history of the Department of Justice, but it doesn’t go nearly far enough.
According to the Center for Public Integrity, Wells was the eighth-largest originator of subprime mortgages during the housing boom. They were among the 25 biggest participants in the subprime market that brought in almost $1 trillion dollars. As the number eight player in a game that brought in 12 figures, Wells should be paying out nothing short of a billion dollars.
Through their subprime loans, the bank charged higher fees and rates to more than 30,000 minority borrowers. The Justice Department also alleged that mortgage brokers working with Wells Fargo encouraged more than 400,000 minority borrowers to get the more expensive subprime mortgages, according to Fortune Magazine.
This settlement comes on the heels of Wells Fargo agreeing to give out $425 million in new loans and economic development grants to citizens in Baltimore who they swindled and ripped off with subprime loans because they were black or lived in majority black communities.
And it’s not just Wells Fargo. In December, the Justice Department's got its biggest fair lending settlement when Bank of America agreed to pay $335 million to settle allegations that its Countrywide Financial unit discriminated against minorities. Bank of America also admitted no fault. Earlier this year, SunTrust Bank also denied doing anything wrong when it agreed to pay $21 million to resolve a similar case.
This is far from over. The Justice Department is still investigating 15 other matters involving fair lending, an official with the department said Monday.
As for Wells Fargo, they’re doing just fine. In addition to the $25 billion they got in a government bailout, they made more than $15 billion in profit last year, have $89 billion in revenue and $1.3 trillion in assets. Writing a check for $175 million to borrowers who have undeniable proof that they were preyed upon is nothing to them.