US bank pays out $175m to settle claim of race bias

Wells Fargo accused of making black and Hispanic customers pay higher product fees

One of America's largest banks has agreed to pay $175m to settle claims that it engaged in racial discrimination during the pre-crash housing boom by charging black and Hispanic customers higher fees than whites for their mortgages, sometimes steering them into costly sub-prime loans.

While agreeing to pay the fines, Wells Fargo, which has made significant contributions to the presidential election campaign of Mitt Romney, made clear it was doing so to end the litigation and was not admitting to any guilt in the case. The announcement nonetheless puts an unwelcome spotlight on practices which, according to the US government, amounted to the levying of a "racial surtax".

The US Justice Department said more than 34,000 black and Hispanic borrowers in 36 states paid more for their home loans purely because of the colour of their skins and not for reasons of creditworthiness. Of the sum to be paid by the bank, $125m will go towards compensating those borrowers. The balance of $50m will be used to help borrowers in the regions where most victims lived – including Washington, New York, Philadelphia, Baltimore and California – with their mortgage deposits.

The agreement also brings to a close litigation brought against the San Francisco-based Wells Fargo by Lisa Madigan, Attorney-General of Illinois. The state also accused the bank of deliberately peddling high-cost subprime mortgages in minority areas.

"Wells Fargo's illegal discriminatory lending practices helped destroy a generation of wealth in African-American and Latino communities in Chicago and across the nation," Ms Madigan said, adding that the settlement "holds Wells accountable and requires the bank to invest in the same communities it helped [to] destroy".

Officials said the fine was the second-largest imposed in a fair-lending case. It was, however, a good deal less than the $335m that Bank of America agreed to pay in November to settle allegations that its Countrywide mortgage unit similarly sold overpriced loans to minority customers during the mortgage-lending rush.

All of the leading US banks have donated heavily to Mr Romney, who, as the Republican nominee, is outstripping President Barack Obama in fund-raising, in part thanks to support from Wall Street. Wells Fargo is estimated to have given him $235,550 by the end of June, and Dan Bricken, the managing director at Wells Fargo Securities, will reportedly act as the co-host for one of two Romney fund-raising events in London this month.

The fines against Wells Fargo were announced by the US Deputy Attorney-General, James Cole, thus concluding a case investigated by the civil rights office at the Justice Department. "[The action] makes clear that we will hold financial institutions accountable, including some of the nation's largest, for lending discrimination," Mr Cole said.

The loans were not sold by the bank's internal retail mortgage division but by independent brokers. Wells Fargo said yesterday it would stop using outside brokers to sell its mortgage products.

The bank insisted it was not admitting culpability, saying: "Wells Fargo is settling this matter solely for the purpose of avoiding contested litigation with the [justice department] and to instead devote its resources to continuing to provide fair-credit services and choices to eligible customers."

Under the agreement, about 30,000 borrowers who were charged inflated fees for mortgages will each receive roughly $2,000 compensation. About $15,000 will be paid to each of around 4,000 customers who, according the government, were pressed into buying costly subprime loans because of their ethnicities.

Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind-the-scenes to watch the latest series
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
News
Winchester College Football (universally known as Winkies) is designed to make athletic skill all but irrelevant
Life...arcane public school games explained
PROMOTED VIDEO
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
News
i100(and it's got nothing to do with the Great British Bake Off)
News
Angelina Jolie with her father Jon Voight
peopleAsked whether he was upset not to be invited, he responded by saying he was busy with the Emmy Awards
News
Bill Kerr has died aged 92
peopleBill Kerr appeared in Hancock’s Half Hour and later worked alongside Spike Milligan and Peter Sellers
News
news It's not just the world that's a mess at the moment...
Sport
footballPremiership preview: All the talking points ahead of this weekend's matches
News
Keira Knightley poses topless for a special September The Photographer's issue of Interview Magazine, out now
people
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
News
i100
Sport
Mario Balotelli pictured in his Liverpool shirt for the first time
football
Life and Style
tech
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Data Scientist (SQL,Data mining, data modelling, PHD, AI)

£50000 - £80000 per annum + benefits+bonus+package: Harrington Starr: Data Sci...

SAS Business Analyst - Credit Risk - Retail Banking

£450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...

Project Manager - Pensions

£32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...

KYC Analyst, Birmingham - £200-£250 p/d

£200 - £250 per day + competitive: Orgtel: KYC Analyst, Key Banking Client, Bi...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone