The bank and mortgage provider, Wells Fargo is in another legal debacle as the City of Philadelphia sues the bank for predatory lending. According to the city, the mortgage lender is violating the federal Fair Housing Act; the bank’s most recent account scandal is still taking a big toll on the company’s overall image and brand.
The new legal case has been filed after the United States’ Supreme Court announcement that cities can lenders for alleged discrimination that causes defaults by minority followers, and harm cities through lower property tax revenue and increased costs to combat crime and blight.
WF’s Tom Goyda’s Response
Wells Fargo’s spokesman Tom Goyda said in a statement, "The city's unsubstantiated accusations against Wells Fargo do not reflect how we operate," and "Wells Fargo has been a part of the Philadelphia community for more than 140 years and we will vigorously defend our record as a fair and responsible lender."
Philadelphia has pressed charges on the bank after 2004’s scandalous activity; minority borrowers were led to higher-cost, riskier loans than white borrowers; this is even if the minority borrowers were qualified for loans that are equipped with easier terms and having them restricted on borrowing any finances. According to the city, black borrowers were more susceptible on higher costs and riskier loans that of the white borrowers, Hispanic borrowers shared the same sentiments.
In an analysis brought by the city, they found out the 23.3% of loans issued to minority borrowers were more high-cost and high-risk, while 7.6% of the same type loans were issued to white borrowers. More so, it is found out that African-American were 2.1 times more likely to be offered on such frivolous loans, while Latinos were 1.6 times. The US Department of Justice also noted that several complaints were filed by other cities such as Los Angeles, Oakland, Miami, Baltimore, and Miami Gardens.
WF’s Shares Plummets
The bank has a history of “red-lining”, the most recent are the fraudulent customer accounts they were charged with. Currently, the company’s shares are reaching new lows today with all the scandals and legal predicaments they are in. The bank is currently sitting on a 3.2% increase for the past 6 months; they are underperforming from the 10.1% growth many analysts are expecting. Wells Fargo is currently carrying a Zacks’ rank 3 or hold, better financial institutions such as PNC Financial Service Group Inc. are carrying a Zacks’ rank 1 rating or a strong buy.
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