Wells Fargo has settled a four-year discrimination lawsuit, in which the bank’s board was accused of allowing exclusionary hiring and lending practices.
Bank shareholders, employees and job applicants filed the suit in September 2022, alleging that the company failed to follow through on its diversity, equity and inclusion (DEI) measures and that its lending algorithm resulted in disproportionate mortgage denials for minority borrowers. The plaintiffs alleged the board was aware of the issues, but declined to fix them.
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A Bloomberg investigation backed the plaintiff’s claims, with 2020 Home Mortgage Disclosure Act data revealing that Wells Fargo denied Black homeowners refinance applications at a higher rate than it accepted them. The bank approved 47 percent of Black homeowners’ refinance requests — a rate that was 33 percent lower than the average rate for all other major lenders.
“Nationwide, only 47 percent of Black homeowners who completed a refinance application with Wells Fargo in 2020 were approved, compared with 72 percent of White homeowners,” the report read. “While Black applicants had lower approval rates than White ones at all major lenders, the data show, Wells Fargo had the biggest disparity and was alone in rejecting more Black homeowners than it accepted.”
Wells Fargo still denies wrongdoing, but has created a three-year $100 million mortgage assistance program for borrowers in disenfranchised communities. The bank will also pay $10 million to shareholders.
“Defendants are entering into this Stipulation for settlement purposes only and solely to avoid the cost, disruption, and uncertainty of further litigation,” court documents read. “Defendants agree that the Litigation was filed in good faith and with an adequate basis in fact, was not frivolous, and is being settled voluntarily.”
“We are pleased to have reached a settlement,” Wells Fargo added in a statement to Realtor.com, which reported the news on Thursday.
Wells Fargo isn’t the only lender to face discrimination claims; Navy Federal, Fannie Mae, Rocket Mortgage and Solidifi have also faced claims that they targeted borrowers and employees of color during the hiring and lending processes.
Those lawsuits are still working their way through the courts.
