Wells Fargo Accused of Bias

Wells Fargo & Co. reduced mortgage fees and interest rates to attract many Southern California customers beginning in 2002 but didn’t offer the same deals through offices in certain minority neighborhoods, according to a Los Angeles County Superior Court lawsuit.

The complaint, filed Friday, contends that borrowers from Latino and black areas were systematically charged more than those with similar credit profiles in adjacent areas, violating consumer-protection and civil rights laws.

It seeks refunds of alleged overcharges to thousands of Wells borrowers, and it seeks certification as a class-action lawsuit on their behalf.

Wells Fargo disputed the allegations, saying in a statement that its loan fees and rates were based on “risk, not race, and we market to individual customers, not neighborhoods.”

The San Francisco company, the largest bank based in California, said it didn’t tolerate discrimination and indeed was “keenly aware that our growth depends on our success in serving diverse customers with a wide range of credit histories.”

The lawsuit says borrowers in more affluent areas saved $500 to $10,000 per loan in fees and could lower their interest rates. It says a Wells computer program, introduced in spring 2002, “would literally turn green to show the loan officer and/or manager how to save the borrower money.”

However, it contends, a Wells Fargo area manager “refused to allow loan officers operating from certain Los Angeles minority branches” to implement the discount program.

“It is our belief that Wells Fargo thought minority borrowers were less savvy than nonminority borrowers and would not question excessive fees and charges,” said Jeffrey Fleitman of Beverly Hills, one of the lawyers who filed the suit.

Fleitman said “30-plus” offices in largely minority areas allegedly were involved in the discrimination, which he contended was still taking place in some offices. The five named plaintiffs are from Carson, West Covina and Los Angeles.

Wells Fargo Bank and its Wells Fargo Home Mortgage subsidiary -- the U.S.’ No. 2 home lender -- are named as defendants, but not Wells Fargo Financial, a non-bank subsidiary of Wells Fargo & Co.

The Assn. of Community Organizations for Reform Now has previously criticized the lending practices of Wells Fargo Financial, which concentrates on the so-called sub-prime market of borrowers with credit blemishes, heavy debts and other issues.

New York Atty. Gen. Eliot Spitzer, who has charged Wall Street firms, mutual funds and insurers with improper practices, has subpoenaed lending records from Wells Fargo and several other national banks to examine whether white customers get better deals than minorities with similar credit profiles.

Wells and the other banks have contended that Spitzer, as a state regulator, has no authority over them.

The U.S. Office of the Comptroller of the Currency, the chief regulator of nationally charted banks, says it is the only agency that can oversee their banking actions.