Legal

Wells Fargo Predatory Lending Lawsuit Allowed to Proceed

A federal judge has ruled that a lawsuit against Wells Fargo & Co. can proceed.

The lawsuit accuses the third-largest U.S. bank of predatory mortgage lending targeting black and Hispanic borrowers in the Chicago area.

According to Reuters, U.S. District Judge Gary Feinerman ruled that Illinois’ Cook County can proceed with its federal Fair Housing Act claims against Wells Fargo, but only to a certain extent.

While the lawsuit can address the bank’s alleged “equity stripping” practices, claims alleging damages from lost property taxes, the need to combat crime, racial segregation and other issues were dismissed.

Feinerman instead called those accusations “ripples” that “flow far beyond” Wells Fargo’s alleged misconduct. He went on to cite a May 2017 U.S. Supreme Court decision, which involved similar claims by the city of Miami against Wells Fargo and Bank of America. That ruling allowed cities to pursue FHA claims as long as they could establish a “direct” link between the alleged misconduct and the resulting harm.

The County Cook lawsuit began in November 2014, accusing Wells Fargo of pushing minority borrowers into loans they could not afford, which then resulted in higher fees, defaults and foreclosures. In addition, the bank rewarded employees with bonuses for offering these loans.

“While the court has allowed the lawsuit to proceed, we are encouraged by the fact that it has significantly limited the scope of the allowable claims,” Wells Fargo spokesman Tom Goyda said in an email on Tuesday. “We are prepared to defend our record as a fair and responsible lender.”

In January, the bank's effort to toss out a similar lawsuit lodged by the city of Philadelphia failed.

Additional U.S. cities — including Baltimore, Cleveland and Los Angeles — also have brought predatory lending cases against major banks. The cities contend the mortgage lenders’ discrimination has resulted in more defaults by borrowers who are minorities, lower property tax revenue and increased expenses to fight crime.

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