“An applicant’s creditworthiness, and not the color of his or her skin, should determine what loans a borrower qualifies for.”
~Deputy Attorney General James Cole
Wells Fargo disputes the reason they’re giving $175 MILLION dollars to those claiming Wells Fargo’s lending policies were racist because of a class action lawsuit. They won’t say why they chose to give such a huge sum in response to this lawsuit by the Department of Justice but they claim no responsibility or fault for their behavior. Last year – Bank of America agreed to pay $335 million for the role a subsidiary played in racist lending practices. In the last 7 months – two banks have had to pay $500 million due to investigations by the Department of Justice … way to go Eric Holder.
The LA Times has the story HERE:
Norwest Corp. of Minneapolis, which took over Wells Fargo in 1998 and adopted Wells’ distinctive brand and San Francisco headquarters, had a large national subprime lending operation. The unit, which made auto and personal loans as well as mortgages, became a target for minority advocacy groups, which accused it of abusing lower-income borrowers.
Wells Fargo currently originates more than a third of all U.S. mortgages, more than the combined total of the next seven biggest home lenders. In a statement Thursday, it denied the government’s claims and said it was settling the case to avoid prolonged litigation with the Justice Department.
Violations of the Equal Credit Opportunity Act and the Fair Housing Act allegedly took place in at least 82 geographic markets across 36 states and the District of Columbia.
“This resulted in more than 34,000 African American and Hispanic wholesale borrowers paying an increased rate for loans simply due to the color of their skin – including approximately 4,000 African-American and Hispanic wholesale borrowers who were steered into subprime mortgages,” Cole said.
Some might claim that African-Americans and Latinos by and large (as an aggregate) have lower credit scores than whites … and they’d be right (source). We could go into an depth explanation on that but that’s an entirely different story altogether.
That’s not what is being challenged here. The issue at hand is that minorities with similar credit scores as non-hispanic whites received higher interest rates over and over and over. So – a person’s credit had very little to do with the interest rate on their home or car … their skin color was far more important in judging what rate they should pay. That’s abhorrent. That’s institutional racism and Wells Fargo isn’t paying out $175 million people as an olive branch to the black and Latino communities.
Color Lines explains the data HERE:
From 2004 to 2008, only 6.2 percent of white borrowers with credit scores of 660 and above ended up with higher-rate mortgages. Latinos and blacks with good credit scores, however, were three times as likely to end up with higher-rate mortgages, according to an analysis published Thursday by Algernon Austin, director of the Economic Policy Institute’s Race, Ethnicity, and the Economy program.
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