One of the biggest banks in the US has agreed to pay a $175m to settle allegations it charged higher mortgage rates and fees to black and Latino customers in violation of fair-lending laws.
"This sort of discrimination ends up having very long-term effects on the people that it occurs to. Their credit ratings are now ruined .... To get jobs nowadays you have to have a good credit. It then affects their children and their children's children."
- Edward Wyckoff Williams, a political analyst and former investment banker
The payment by Wells Fargo is part of US President Barack Obama's effort to end discriminatory lending practices in the banking industry - practices that left minority neighbourhoods blighted by foreclosures after the housing bubble burst.
A government investigation found tens of thousands of cases of African Americans and Hispanics being charged more than white customers with similar credit profiles.
The settlement is the second-biggest of its kind; the Bank of America paid $335m over similar charges. But in both cases, the banks were allowed to deny any wrongdoing.
And to add insult to injury, just a day after the settlement, Wells Fargo on Friday announced second quarter profits of $4.6bn, which is 26 times the amount it agreed to pay out.
Are banks being sufficiently discouraged from wrongdoing?
Joining Inside Americas to discuss this are guests: Jordan Estevao, the director of the Bank Accountability Program at National People's Action, a community direct action group; Edward Wyckoff Williams, a political analyst and former investment banker; and Richard Wolff, a professor of economics at the University of Massachusetts-Amherst.
"This is a case about real people - African American and Latino - who suffered real harm as a result of Wells Fargo's discriminatory lending practices."
Thomas Perez, assistant attorney general, who leads the civil rights division at the Justice Department
What the US Justice Department found when they investigated mortgage mis-selling by Wells Fargo:
- They found 34,000 instances of Wells Fargo charging African Americans and Hispanics higher fees and rates on mortgages compared with white borrowers who posed a similar credit risk
- Wells Fargo also steered 4,000 of these customers into sub-prime loans even though they qualified for cheaper mortgages
- In 2007, customers in the Chicago area who borrowed $300,000 from Wells Fargo paid an average of $2,937 more if African-American and $2,187 more if Hispanic compared to similarly qualified white borrowers
- Wells Fargo has agreed to pay compensation in eight areas: Baltimore, the Bay area, Chicago, Cleveland, Los Angeles, New York, Philadelphia, Washington DC
- The bank also resolved a lawsuit filed by the city of Baltimore that the bank had engaged in 'reverse redlining', intentionally targeting minority areas of the city for predatory loans
- Historically US banks have practiced 'redlining' where they had deliberately refrained from offering loans in certain minority neighbourhoods
Source: Al Jazeera