The City of Oakland is taking on one of the largest financial institutions in the world, alleging that the bank preyed on black and Latino borrowers for years.
According to a new lawsuit filed this September, Wells Fargo intentionally steered black and Latino families into incredibly risky mortgages. Even minority borrowers with good credit were pushed into likely-to-fail loans, the city alleges, while white borrowers with bad credit were given more favorable mortgages. Oakland City Attorney Barbara Parker says that black and Latino residents were set up to fail in Oakland, Los Angeles, Baltimore, and elsewhere.
That’s why Oakland is joining an aggressive legal push to hold Wells Fargo accountable. Earlier this year, Los Angeles City Attorney Mike Feuer filed another suit against Wells Fargo for allowing its employees to engage in “unfair, unlawful and fraudulent conduct.”
“Some of the testimony that we have gotten indicates that they felt that these borrowers were less sophisticated,” Parker says. “In some cases there’s comments that they thought they were less intelligent. It’s hard to imagine that being the case today, but in effect that’s what happened over years.”
When the housing bubble burst, many homeowners with risky mortgages went into foreclosure, while others were forced to file for bankruptcy as well. During the peak of the housing crisis in 2009 and 2010, 1.41 million and 1.5 million Americans filed for bankruptcy. In 2014, that number had dropped to 1.1 million, but in some cities, like Oakland, the foreclosure crisis never really ended.
“I think local governments, local jurisdictions, have been trying to deal with the crisis, because they see it had not been dealt with at the federal and state level sufficiently,” says Kevin Stein, with the advocacy group California Reinvestment Coalition.
In 2012 in Baltimore, Maryland, Wells Fargo reached a $175 million settlement with the U.S. Department of Justice over similar allegations of predatory lending. For its part, Wells Fargo strongly denied the allegations of predatory practices. A spokesman told KQED, “Wells Fargo has been a part of the Oakland community for more than 140 years and we will vigorously defend our record as a fair and responsible lender.”
Oakland’s City Attorney Barbara Parker disagrees. She says if she gets her day in court, she intends to show that not only did Wells Fargo engage in predatory lending, but that they continue to do so to this very day.