On Monday, Philadelphia became the latest city to bring a lawsuit against Wells Fargo, claiming the financial institution has engaged in an ongoing practice of discriminating against minorities.
“The city of Philadelphia’s investigation revealed that both the resources of the city and the lives of Philadelphia’s citizens have been negatively affected by Wells Fargo’s discriminatory lending practices,” City Solicitor Sozi Pedro Tulante said in a statement on the lawsuit. “The Law Department must take action in light of this evidence and halt these discriminatory practices on behalf of the citizens of Philadelphia.”
Wells Fargo denied any allegations of discriminatory practices. But the lawsuit against Wells Fargo filed in Philly federal court alleges that since 2004, Wells Fargo has violated the Fair Housing Act by steering African-American and Latino borrowers toward high-interest and high-risk loans, even when the borrowers’ credit would permit them to obtain a lower interest rate or more advantageous loan.
With this action, Philadelphia noted that it will join the U.S. Department of Justice and the cities of Los Angeles, Oakland, Miami, Baltimore, Memphis and Miami Gardens, among others, who have previously filed similar lawsuits against Wells Fargo.
According to court documents, the city believes that Wells Fargo “was aware and, in fact, incentivized the marketing of the high-cost or high-risk loans to minorities.”
“The city’s unsubstantiated accusations against Wells Fargo do not reflect how we operate in Philadelphia and all of the communities we serve," a bank spokesman said in an email. "Financial institutions cannot be held responsible for harm they didn’t cause. 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. … Wells Fargo has been a part of the Philadelphia community for more than 140 years and we will vigorously defend our record as a fair and responsible lender."
But the city claimed that African-American Wells Fargo borrowers were more than twice as likely to receive a high-cost or high-risk loan than a white borrower, while Latino borrowers were 1.6 times more likely to receive those loans than a white borrower.
The city says the lawsuit is based on an assessment of Wells Fargo’s lending practices, applicable legal authority and an analysis of available loan data by the city’s outside counsel and their experts, which found that 23.3 percent of loans from Wells Fargo to minority customers in Philadelphia were high-cost or high-risk, while only 7.6 percent of loans made to white customers were high-cost or high-risk.
“The practices of Wells Fargo disproportionately affected minority borrowers here in Philadelphia,” Mayor Jim Kenney said in a statement. “And because many of these loans resulted in foreclosures, all neighborhoods throughout the city suffered the harm. I am proud that the city is committed to fighting against practices that unfairly impact its minority population and have drained resources from all Philadelphia neighborhoods. And I particularly thank members of the City Council who have long battled predatory lending in their districts and across the entire city.”
The city said it is seeking “equitable relief” from Wells Fargo, which may include an injunction requiring the bank to stop engaging in discriminatory lending practices. The suit also seeks monetary damages from the bank, based on the loss of property tax revenue resulting from unpaid taxes on abandoned properties, as well as a reduction in tax collections due to the decrease in value of foreclosed properties and properties in proximity to foreclosures.
Any city residents who may have information relevant to the allegations made against Wells Fargo are asked to contact the city’s Law Department at [email protected].