Discriminatory Lending Allegations to Cost Wells $3.2 Million

Wells Fargo has upgraded to $3.2 million a fund designated to compensate African-American and Hispanic borrowers in Philadelphia who allegedly suffered from the bank’s predatory lending practices.

Up from $2 million of the fund is part of a multistate, $175 million settlement with the Department of Justice, Wells Fargo announced in December 2012.

Wells Fargo denied the racial discrimination charges. However, the bank settled with the Department of Justice to resolve the Pennsylvania complaint as well as complaints in other states.

The Pennsylvania Human Rights Commission and the Department of Justice reported they will use a portion of the $3.2 million predatory lending settlement fund to compensate more than 1,000 borrowers who allegedly have suffered housing-related damages.

Compensation is based on findings form a 2010 investigation that explored allegations in a complaint that accused Wells Fargo of discrimination, “by steering African-American and Hispanic borrowers into subprime mortgages,” even though they qualified for prime mortgages under Wells Fargo's underwriting criteria, and charged higher broker rates and fees.

The commission is in the process of notifying Philadelphia borrowers who have qualified to receive compensation funds from Wells Fargo. Notices were mailed to these borrowers starting on April 25.

“If they choose to participate in the settlement,” the Pennsylvania Human Relations Commission said, African-Americans and Hispanic residents of Philadelphia who took out home loans with Wells Fargo from 2004 through 2009 will be notified of the amount they will receive.

According to the commission's executive director, JoAnn Edwards, the hope is the settlement will help prevent future lending discrimination based on “race, national origin or any other protected factor."

The commission plans to also contact by phone every borrower who received a notice in April and May to ensure they are aware of their settlement rights.