Philadelphia sued Wells Fargo Monday, claiming the American banking icon engaged in predatory lending practices in violation of the federal Fair Housing Act (FHA).
The lawsuit comes on the heels of a Supreme Court ruling in early May that said municipal governments have legal standing to sue banks over discriminatory lending practices under the FHA. In a 5-3 ruling, the justices ruled that cities can sue if they can provide a direct, causal relationship between lending practices and injuries the local governments incur. (RELATED: SCOTUS Rules Cities Can Sue Banks Over Discriminatory Lending)
Philadelphia is accusing Wells Fargo of pushing minority groups into higher-cost loans than caucasian borrowers, even if minority borrowers qualified for lower-costs loans. The lawsuit claims that black borrowers were over twice as likely to receive a higher-cost, riskier loan than white cohorts. The city says the same relationship presented itself with hispanic borrowers.
Wells Fargo argues that the city’s claims against the bank are “unsubstantiated” and furthermore fail to accurately reflect how the bank operates, Reuters reports.
Monday’s lawsuit is the latest in a troubled saga for Wells Fargo.
The bank landed in hot water in September, 2016, when it was uncovered that the bank was participating in illegal retail lending practices.
Bank employees issued 565,000 lines of credit and opened 1.5 million bank accounts for customers without their consent from 2011-2014, and sometimes created false email addresses to sign them up for banking services in order to pad their numbers. Some 14,000 of those credit accounts accrued over $400,000 in fees alone. (RELATED: DOJ Demands Wells Fargo Whistleblower Testify In Formal Investigation)
Initially, Wells Fargo was slapped by the Consumer Financial Protections Bureau (CFPB) with a $185 million fine — the largest ever levied by the federal agency — after finding these practices were rampant throughout Wells Fargo since 2011. (RELATED: CFPB Fines Wells Fargo $185 Million For Opening Fake Accounts)
Former Chairman and CEO of Wells Fargo John Stumpf faced congressional investigation, which ultimately led the bank’s board to force the executive to cough up $41 million in assets and earnings he accrued from his decades-long tenure. The move, however, proved not harsh enough for members of Congress and the public. Stumpf announced he was stepping down as chairman and CEO Oct. 12, 2016.
The new CEO of Wells Fargo, Tim Sloan, took over for Stumpf in December, 2016.
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