Two Cities Sue Wells Fargo For Discrimination

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The New York Times has posted an article that discusses recent lawsuits that accuse Wells Fargo of discriminating against African Americans by steering them into predatory loans. Allegedly, the company deliberately pushed African American homeowners, who qualified for prime mortgages, to subprime loans. The lawsuits claim that the homeowners could have kept up with mortgage payments on a prime loan, but the more expensive subprime loan payments caused them to default on the loan. The case also claims that Wells Fargo should have known that would happen.

One of the lawsuits comes from Memphis, Tennessee and the other from Baltimore, Maryland.

“The City of Memphis and Shelby County have not alleged that Wells Fargo lending practices resulted in a host of social and political ills plaguing entire sections of the community,” Judge Anderson wrote in a 32-page order. “Rather plaintiffs contend that defendants have targeted individual property owners with specific lending practices (reverse redlining), resulting in specific effects (foreclosures and vacancies) at specific properties, which in turn created specific costs (services and tax revenue) for local government.”

Judge Anderson of the Federal District Court for the Western District of Tennessee dismissed the lawsuit, saying that it was too “broadly drawn.” Judge Anderson’s ruling came about 2 weeks after a similar case was dismissed in Baltimore by Judge Motz.

But this time, Judge Motz said city officials had narrowed the allegations enough to show a plausible link between Well Fargo’s actions and its impact on the city. The issue, he said, was whether “the city has plausibly alleged that the properties in question would not have become vacant but for the allegedly improper loans made by Wells Fargo.”

He said the city provided the link by claiming that Wells Fargo deliberately steered African-American borrowers who qualified for prime mortgages into subprime loans. As a result, the plaintiffs claim, borrowers who could have kept up with payments on a prime loan defaulted because of the more expensive subprime payments.
But this time, Judge Motz said city officials had narrowed the allegations enough to show a plausible link between Well Fargo’s actions and its impact on the city. The issue, he said, was whether “the city has plausibly alleged that the properties in question would not have become vacant but for the allegedly improper loans made by Wells Fargo.”

Ms. Teri Schruttenbrunner, a spokeswoman for Wells Fargo, said:
“We disagree with these rulings, and we will present the facts which we believe will ultimately win these cases. Our team members make loan pricing decisions based on credit and transaction risks, consistently treating our customers fairly.”

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