NAACP drops suit after Wells Fargo agrees to develop fair loan programs for minorities
The NAACP said it had dropped a lawsuit that accused Wells Fargo & Co. of unfairly steering African American borrowers into costly subprime mortgages while providing loans with lower fees and interest rates to white borrowers in similar financial circumstances.
The civil rights group said it withdrew the suit after the bank agreed to work with it to develop programs to improve access to the best loans possible in minority neighborhoods and to ensure that borrowers don’t get mortgages destined for failure. Wells Fargo made no payment or admission of wrongdoing.
In a joint statement Thursday announcing the agreement, the San Francisco bank said it had worked for generations to lend responsibly in 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 phone interview.
Wells Fargo is one of several lenders the NAACP has sued since 2007, when the first wave of foreclosures began hitting subprime borrowers. The suit alleged violations of the Fair Housing and Equal Credit Opportunity acts.
The NAACP said it wasn’t looking to win monetary damages but rather to change mortgage lending patterns.
Brian Kabateck, a Los Angeles lawyer for the NAACP, said he hoped Wells Fargo’s action would motivate other lenders to do the same. Though many defendants in the NAACP suits were subprime lenders that have gone out of business, lawsuits continue against JPMorgan Chase & Co., Citigroup Inc.'s Citibank unit and others. The NAACP is negotiating with Bank of America Corp. while reserving the option of filing a suit, Kabateck said.
NAACP officials said that as part of the agreement with Wells Fargo, the bank endorsed the group’s fairness principles. They include banning the use of a borrower’s ZIP Code in setting loan terms, presenting the borrower with all good loan options, and not using artificially low “teaser” interest rates in deciding whether a borrower qualifies for a loan.
The NAACP principles also require the bank to have programs encouraging it to include among its contractors small businesses owned by minorities and women.