In Philadelphia, there is an ongoing case involving the City of Philadelphia vs. Wells Fargo& Co. in the case, the City of Philadelphia is accusing the bank of violating the state law, Fair Housing Act of 1968. According to the City of Philadelphia, the bank is using voracious tactics in its lending to minority mortgage borrowers. The bank has however denied the allegations and has gone ahead to argue that indeed their practices are legal and fair. They claim that the petitioner has not substantiated the allegations being leveled against the bank. The case is ongoing at the U.S. District Court, Pennsylvania. This case just adds to the list of challenges that the bank is facing since it was hit by scandals last year. The scandals were about the bank opening fake accounts using the credentials of its customers.
According to the allegations presented before the court, the city accuses the bank of offering mortgages to Americans of black and Hispanic origin at higher interest than they should. This is despite then qualifying for lower interests rates that are less risky. Wells Fargo Bank, with headquarters in San Francisco, has been exploiting their clients based on the race. This according to the city, this act amounts to racial profiling of their clients while at the same time putting them in a difficult financial position regarding refinancing their mortgage. The effect has been that the affected clients are paying even huge interests due to failure to meet their refinancing duration.
This practice, however, was not happening to white borrowers. Before filing the case, the city has been investigating the practice for about a year. According to the city, they scrutinized lending data dating back to 10years, and the results have been shocking. They found that for black clients there was a double chance that they would be charged a higher interest rate for their loans than was the case with the whites. For the Hispanics, the probability is 1.7.
The city compared the credit rating of all the affected clients and found that they all had the same credit rating and therefore that was not the criteria that the bank was applying in charging a higher interest rate.
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About Karl Heideck
Karl Heideck is an attorney dealing with complex bank litigation and bank securities fraud cases. His main areas of specialization are; acquisitions and transactions, risk management, liquidity, and mortgage issues.
Karl Heideck holds a Juris Doctor from of Temple University Beasley School of Law. Karl Heideck graduated from Swarthmore College with B.A in 2003. He serves in Philadelphia.