Class Action Lawsuit Accuses Wells Fargo of Racial Redlining in Home Loan Application Process

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Wells Fargo, N.A. faces a proposed class action that alleges the bank has unlawfully rejected the majority of home loan applications submitted by African American and Black consumers in comparison to those submitted by white applicants. 

The 25-page lawsuit also alleges that Wells Fargo’s home loan application process is by design “more difficult for African American applicants to complete.” The suit alleges, ultimately, that Wells Fargo is among the institutions that continue to discriminate against credit-worthy African American and Black consumers in their home loan offerings.  

“Starting in at least 2018, and continuing to the present, Wells Fargo has discriminated against African Americans, and other racial minorities, by deploying a modern home loan scheme that is tantamount to 21^st century redlining,” the complaint charges. 

To accomplish this, the lawsuit alleges, Wells Fargo first uses a computer system that automatically deploys automated algorithms and artificial intelligence-like machine learning as part of its home loan decision-making process. These algorithms and machine learning technologies, the suit alleges, select geographic areas that are “predominantly African American (and other racial minorities)” and subject those areas and the people living there to “adverse treatment” in conjunction with home loan decisions. 

“For example, Wells Fargo’s algorithm labels certain neighborhoods that are predominantly Black as neighborhoods ineligible for rapid loan processing, a service provided to similarly situated white applicants. As a result, Wells Fargo loan personnel have told African American loan applicants who live in predominantly Black neighborhoods that they would not receive the same rapid application process as their white counterparts.” 

Second, Wells Fargo applies “several pretextual actions” during the home loan application process that are “specifically targeted at non-white borrowers,” according to the complaint. The lawsuit claims these actions include providing African American and Black borrowers with “an inferior and slower valuation process” for homes in predominantly Black neighborhoods and delaying the processing of their applications in comparison to their white counterparts. 

Per the filing, the disparate impact of Wells Fargo’s allegedly discriminatory scheme is “quite clear.”

“A white applicant seeking to refinance their home loan, who earned between $0 and $63,000 per year were more likely to have their home loan financing application approved by Wells Fargo than a Black applicant seeking to refinance their home loan, who earned between $120,000 and $168,000 per year. As a result of Wells Fargo’s barrage of pretextual actions aimed at deterring Black applicants, more than one-quarter of all Black homeowners who began an application to finance their home loan through Wells Fargo did not finish their application.”

Further, the case says that Wells Fargo is the only major U.S. lender that approved a smaller share of refinancing applications from Black consumers in 2020 than it had in 2010. The bank was also the only major lending institution in the country to reject the majority of Black applicants who sought to refinance their homes, the suit alleges, calling this conduct “especially pernicious” given those looking to refinance, as opposed to those applying for a new loan, have already established their ability to pay a mortgage with a higher interest rate. 

According to the suit, the experiences of the plaintiffs mirror those of “so many Black and Brown Americans who have been damaged by Wells Fargo’s systemic discrimination.” 

“Wells Fargo’s discriminatory conduct violates the commercial and civil rights of Class members and has caused hundreds of millions of dollars in damages to the Class,” the case alleges. 

The lawsuit looks to represent all Black individuals, as well as other racial minorities, who from January 1, 2018 through the present submitted (or attempted to submit) an application to finance or refinance their home mortgage through Wells Fargo and had their application processed at a slower rate than the average processing time for non-Black or other non-racial minority applicants. The suit also seeks to cover those who had their applications denied or whose resulting refinanced loans were made at higher interest rates as compared to similarly situated non-Black applicants. 

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