Home Forums General Philadelphia sues Wells Fargo

This topic contains 0 replies, has 1 voice, and was last updated by  Amakhosi 2 months, 4 weeks ago.

Viewing 1 post (of 1 total)
  • Author
    Posts
  • #3904

    Amakhosi
    Keymaster

    Philadelphia sues Wells Fargo for discriminating against African Americans; bank denies allegations

    Philadelphia Wells Fargo

    A woman walks past a Wells Fargo location in view of City Hall, left, in Philadelphia, Thursday, May 11, 2017. Philadelphia’s city council approved legislation to remove Wells Fargo as the bank handling the city’s payroll. On Monday, the city sued Wells Fargo, alleging that it discriminated against African American borrowers. The bank denied the accusations.

    Philadelphia has filed a federal lawsuit accusing Wells Fargo & Co. of overcharging more than 1,000 black and Latino homebuyers for loans to buy homes in the city since 2004.

    Citing six confidential informants who formerly worked for the bank, the city says Wells Fargo knew or should have known that those borrowers could not handle these loans at those terms.

    The suit, filed in U.S. District Court, says unnecessarily expensive loans drove minority borrowers toward foreclosures that cost the city unpaid taxes, drove down property values, and violated the federal Fair Housing Act.

    Wells Fargo, the city’s largest bank, has hurt neighborhoods with a “longstanding, unbroken policy and practice of intentionally steering minority borrowers in Philadelphia into ‘discriminatory’ mortgage loans” at higher cost than it charges “similarly situated white buyers,” the suit charges.

    Responding, bank spokesman James Baum said, “The city’s unsubstantiated accusations against Wells Fargo do not reflect how we operate in Philadelphia” or other communities, where the bank is “a fair and responsible lender.”

    “These types of cases have been pending in other states and have been rejected by all courts who have addressed the merits of the claims,” Baum said.

    Baum cited the U.S. Supreme Court’s May 1 ruling on an appeal of a Fair Housing Act discrimination lawsuit against Wells Fargo and competitors, holding that banks “cannot be held responsible for harm they didn’t cause.”

    In that case, filed against Wells Fargo and other banks by the City of Miami, Justice Stephen Breyer, writing for the court majority, ruled that “the housing market is interconnected with economic and social life,” and plaintiffs such as Philadelphia have to prove a “direct relation” between lawbreaking and damages — a higher standard than merely showing a bank broke the law.

    But the court still allowed cities to sue if they think they can prove direct damage.

    In suing the San Francisco-based banking giant, the city’s public and private-sector lawyers cited the “breakdown of internal controls” under the bank’s “decentralized” management style. The legal group is led by Sherrie Savett and colleagues at Philadelphia-based Berger & Montague, and includes lawyers from Lieff Cabraser Heimann & Berstein; the Center for Constitutional Litigation; Trial and Appellate Resources; the University of California, Irvine, law school; and City Solicitor Sozi Pedro Tulante and his staff.

    The city was encouraged by the ruling in the Miami case and decided to sue, said spokesman Mike Dunn.

    The city also sought to connect incentives that it says made high-interest loans more profitable to the bank’s admission that perverse incentives caused last year’s bogus accounts scandal. That mess has cost the bank hundreds of millions in penalties and forced the departure of former chief executive John Stumpf.

    Twenty years after it bought CoreStates, Wells Fargo remains the dominant lender in the Philadelphia area, with more deposits than rivals PNC, Citizens or TD Bank.

    But its presence has shrunk since the late 1990s, when Wells’ predecessor First Union National Bank, which had taken over several former Philadelphia banks, employed more than 19,000 people in the city and suburbs, and operated 85 branches in the city alone.

    The company now employs about 6,000 in Philadelphia, Wilmington, the suburbs and South Jersey, said Baum. It had 38 branches left in Philadelphia on June 30, according to the Federal Deposit Insurance Corp.

    The bank’s shrinkage in Philadelphia was not a factor in the city’s decision to sue, said Dunn.

    While predecessor Philadelphia National Bank and other local lenders once enjoyed the clout of big employers in winning city contracts, Wells Fargo has less leverage. The Kenney administration plans to replace Wells Fargo as the city’s longtime payroll contractor with Rhode Island-based rival Citizens Financial Corp.

    Without naming the borrowers, the lawsuit gives examples from more than a dozen loans in Olney, North, West, and Southwest Philadelphia, which the city says the bank could have made at “less costly” terms that “would not have yielded the same discriminatory results.”

    It says Wells Fargo fooled the borrowers into “high-cost and abusive loan products” to “knowingly place vulnerable, underserved borrowers in loans they cannot afford.”

    Noting that high-interest loans in minority neighborhoods are more likely to cause foreclosures than similar loans in mostly white neighborhoods, the city argues that the bank’s practice of pushing high-cost loans on minority homebuyers “amplifies the effect.”

    The suit notes that studies by the Center for Responsible Lending and others found that “among borrowers with a [Fair Isaac & Co. credit] score of over 660 (indicating good credit), African Americans and Latinos received a high interest rate loan more than three times as often as white borrowers.”

    The lawsuit doesn’t make direct comparisons between black or Latino borrowers given high-cost loans, with white borrowers in exactly parallel circumstances.

    According to Federal Reserve data compiled by ValuePenguin, a New York-based loan information service, the U.S. average credit score last year was around 687. In Pennsylvania it was 700. The typical mortgage applicant had a score of 720.

    The city reviewed “much more detailed analysis” regarding “similarly situated borrowers” from different groups and concluded that the bank discriminated against blacks and Latinos, said Dunn.

    “Giving a loan to an applicant who does not qualify for the loan, especially a refinance or a home equity loan, can also cause foreclosures and vacancies,” the lawsuit alleged.

Viewing 1 post (of 1 total)

You must be logged in to reply to this topic.