Wells Fargo Facing Lawsuits Over Redlining, Racial Discrimination

Wells Fargo is facing multiple proposed class action lawsuits that accuse the bank of discriminating against Hispanics, Latinos and other minorities in its mortgage refinancing decisions.

Specifically, it has been alleged that the bank is using “redlining,” a discriminatory practice that denies loans and other financial products to those living in certain areas due to the neighborhood’s racial or ethnic characteristics.

Indeed, allegations have surfaced that Wells Fargo is approving white applicants’ mortgage refinance requests at twice the rate of Hispanic, Latino and Black customers. Now, attorneys working with ClassAction.org need to speak with Hispanic and Latino applicants who were denied mortgage refinancing as they continue to look into Wells Fargo’s allegedly discriminatory practices.

What Is Bank Redlining, Exactly?

As stated above, redlining is the discriminatory practice of denying certain services (such as mortgages, insurance and other financial products) to people who reside in certain areas based on their race or ethnicity instead of their qualifications or creditworthiness.

The practice finds its roots in homeownership programs offered by the U.S. government during the Great Depression that allowed Americans to apply for government-insured mortgages.

It was later discovered that the government used color-coded maps that ranked neighborhoods’ creditworthiness to determine which areas should be included in these homeownership and lending programs. Areas determined to be “risky”—and thus, not included in the programs—were marked in red.

Redlining was soon adopted by private lenders as well, and investigations later found that some lenders would make loans to low-income white borrowers while denying loans to Black applicants with higher incomes who lived in minority neighborhoods.

Though redlining is now illegal—with laws such as the Fair Housing Act prohibiting discrimination in the sale, rental and financing of housing based on race, religion, national origin and sex—it’s believed the practice lives on within the bank algorithms that determine whether a person’s financial application should be approved. In other words, some lenders are still discriminatorily denying financial products and offering worse terms to minority applicants just because of where they live and regardless of their creditworthiness or other qualifications.

It is this practice Wells Fargo is accused of using with its home refinance program. Indeed, in March 2022, Bloomberg reported that Wells Fargo only approved 53% of Hispanic applicants for refinancing in 2020 as compared to a nearly 80% approval rate from all other lenders. Statistics for Black applicants were even worse – Wells Fargo approved only 47%, with other lenders averaging at about 71%.

How Could a Class Action Lawsuit Help?

If successful, a class action lawsuit against Wells Fargo could provide Hispanic and Latino customers money to cover the difference between what they paid in interest on their homes and what they should have paid had their refinance applications been approved. The claims against Wells Fargo are particularly concerning as interest rates have dropped significantly over the past several years due to the COVID-19 pandemic, meaning Hispanic and Latino homeowners may have been illegally denied a rare, yet real opportunity to save on interest.

A successful case against Wells Fargo could also force the bank to change the way it processes mortgage refinance applications.

Wells Fargo: No Stranger to Scandal, Discrimination Claims

Wells Fargo is no stranger to scandal or claims of racial discrimination, and one lawsuit currently proceeding against the bank questions “why any minority would ever bank” with a company accused of “such reprehensible conduct.”

In 2012, for instance, Wells Fargo reached a settlement with the U.S. Department of Justice to resolve claims that it was charging Black and Hispanic mortgage customers higher fees and rates than white borrowers and improperly steering them into “subprime” mortgages because of their race or national origin. The company has also settled a lawsuit alleging it unlawfully denied auto loans to Deferred Action for Childhood Arrivals (DACA) recipients.

But it doesn’t end there: Wells Fargo is under federal investigation for allegedly offering “fake” interviews to Black and female candidates to make it appear as though it was trying to diversify its workforce, was forced to pay nearly $8 million in back wages in August 2020 to job applicants allegedly discriminated against for their race and gender, and was sued last year over claims it denied consumers access to certain financial products because of their citizenship and immigration status.

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