Wells Fargo agrees to work with NAACP, settling accusation of lending bias
The NAACP said Thursday it has settled a lawsuit that accused Wells Fargo & Co. of steering African American borrowers unfairly into costly subprime mortgages while providing loans with lower fees and interest rates to white borrowers in similar financial circumstances.
The bank agreed to work with the civil rights group to develop programs that would improve access to the best loans possible in minority neighborhoods and to ensure that borrowers don't get mortgages destined for failure. There was no payment or admission of wrongdoing by Wells Fargo.
In the statement announcing the agreement, the San Francisco bank said it had worked for generations to lend responsibly to minority communities and regarded the agreement with the National Assn. for the Advancement of Colored People as "the next constructive step" toward that goal.
The agreement enables the NAACP to review Wells Fargo's lending practices and make recommendations "to further improve credit availability to African American and diverse businesses and consumers, to further assist borrowers facing foreclosures, and to further promote financial literacy and education."
Laura D. Blackburne, interim general counsel for the NAACP, said the group and Wells Fargo intended to work side by side in inner-city neighborhoods.
"The most important thing is the relationship -- being a collaborative partner with Wells Fargo," she said in a telephone interview. "The example of Wells Fargo taking the lead with us will be a strong and powerful example to other institutions".
Wells Fargo is among a large group of lenders the NAACP has been taking to court since 2007, when the first big wave of foreclosures began hitting borrowers with subprime mortgages. The legal actions alleged violations of the Fair Housing and Equal Credit Opportunity Acts.
The NAACP said that, rather than seeking monetary damages, its intent was to change patterns of unfair lending and discrimination in the mortgage industry.
Brian Kabateck, a Los Angeles lawyer representing the NAACP, said he hoped Wells Fargo's action would motivate other lenders to do the same. While many defendants in the NAACP suits were subprime lenders that have gone out of business, lawsuits continue against JPMorgan Chase, Citibank, HSBC and GMAC. The NAACP also is negotiating with Bank of America while reserving the option of filing a suit, Kabateck said.
NAACP officials said the heart of the settlement was Wells Fargo's endorsement of the group's fairness principles, which include:
--banning the use of ZIP codes in determining loan terms
--presenting all good loan options to borrowers
--providing documents in Spanish as well as English, and access to loan-savvy translators for borrowers who speak other tongues
--qualifying borrowers for loans at fully adjusted mortgage rates, not artificially low "teaser" interest rates
The NAACP principles also require the bank to have programs encouraging it to include among its contractors small businesses owned by minorities and women.
--E. Scott Reckard