Wells Fargo sued by the city of Sacramento for targeting minorities with risky and costly loans
In February, the city of Sacramento filed a federal lawsuit against Wells Fargo that alleged that the bank directs African American and Latino borrowers into high-risk and high-cost mortgages. The lawsuit is also seeking monetary damages against Wells Fargo because the city claims that the mortgages forced the city “to divert resources intended for other programs” to provide services to neighborhoods impacted by the lending practices. The city is asking a jury to determine what monetary damages Wells Fargo should pay. The lawsuit states,
These illegal practices suppressed property values in minority and low income communities in Sacramento, reduced the city’s property tax revenues, and increased the cost of providing municipal services such as police, fire fighting and code enforcement.
One confidential witness, who is a former Wells Fargo employee, told city attorneys that Wells Fargo loan officers racially profiled borrowers’ ability to repay loans. While another witness claimed that a lack of Spanish-speaking loan officers in the Sacramento area led to many Spanish-speaking borrowers agreeing to loans that “were more expensive than necessary.” The city claims that mortgages in predominantly minority neighborhoods were nearly three times more likely to result in foreclosures. The city of Sacramento ended ties with Wells Fargo in October 2016 in the wake of the bank’s fraudulent accounts scandal. We will have to wait and see what the verdict in the lawsuit is.