On the heels of a report by the Federal Reserve that Wells Fargo may have illegally steered more than 10,000 borrowers into more expensive subprime mortgages or falsified loan documents comes news that the Civil Rights division of the Department of Justice is about to sue the banking giant for discrimination based on those shady business practices.
Wells Fargo already agreed to pay $85 million to settle the civil charges stemming from the Federal Reserve investigation. Now it must face Attorney General Eric Holder’s office.
The allegations came to the surface thanks to a lawsuit filed by the city of Baltimore. In that case Wells Fargo is accused of targeting African-American borrowers and majority-black neighborhoods in a practice known in the industry as “reverse redlining”. Baltimore claims Wells Fargo targeted these borrowers knowing they’d ultimately default on their loans but did not worry about carrying any risk associated with default because those loans were to be sold to investors.
When the Federal Reserve allegations are pieced together with those from the Department of Justice what emerges is a picture of an institution that profited from knowingly targeting less-sophisticated borrowers and preying on communities that traditionally lacked access to a full range of consumer credit products.
The Wells Fargo suit is one of 60 open predatory lending investigation, a dramatic uptick from the days of the Bush administration where the Civil Rights division of DOJ barely had a pulse. And while plenty of work remains in cleaning up the foreclosure mess and holding the various criminals accountable, this latest move by the Department of Justice is certainly a step in the right direction.
Photo from MoneyBlogNewz via flickr.