- The city is charging that Wells Fargo pushed minorities into loans that carried higher fees.
- The bank denied the charges and said it will 'vigorously' defend itself.
- Philadelphia recently severed its relationship for Wells Fargo to handle its payroll account.
The City of Philadelphia has taken another swing at Wells Fargo, this time alleging that the bank has been discriminating against minorities.
In a federal court complaint, the city alleges that Wells Fargo pushed minorities into riskier loans with higher rates, even in cases where the borrowers had credit profiles that would have qualified them for lower-rate loans.
The complaint charges that the problem has been ongoing since 2004 and is a violation of the Fair Housing Act, and comes in the wake of an important Supreme Court decision on the legislation. On May 1, the high court ruled that Miami could sue Bank of America for predatory lending practices that allegedly increased segregation.
"The City of Philadelphia's investigation revealed that both the resources of the city and the lives of Philadelphia's citizens have been negatively affected by Wells Fargo's discriminatory lending practices," city Solicitor Sozi Pedro Tulante said in a statement. "The Law Department must take action in light of this evidence and halt these discriminatory practices on behalf of the citizens of Philadelphia."
The lawsuit comes amid a brutal period for Wells Fargo after the bank last September settled charges that it had created millions of fake accounts for customers without their knowledge. Recent disclosures from plaintiffs attorneys involved in other litigation against the bank show that the total accounts in question could number 3.5 million, from the original estimate of 2 million.
In a related matter, Philadelphia City Council recently voted to change handlers of its $2 billion payroll account, switching from Wells Fargo to Citizens Bank.
Wells Fargo recently faced a rowdy reception at its shareholders meeting, during which it faced a barrage of questions over the fake account scandal. Bank officials were contrite, promising to do better in the future.
In the latest Philadelphia case, though, the bank fired back at the lawsuit, which it called "unsubstantiated." The allegations in the lawsuit "do not reflect how we operate in Philadelphia and all of the communities we serve," the bank said in a statement.
"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," the statement added. "We will continue to focus on helping customers in Philadelphia and its surrounding communities succeed financially, and on expanding homeownership in Pennsylvania and across the United States."
Philadelphia is charging that it used loan data to conclude that Wells Fargo was unfairly targeting minorities for high-cost products.
Experts the city hired found that 23.3 percent of the bank's loans to minorities were high-risk, compared to just 7.6 percent for whites. The city is charging that blacks with FICO credit scores above 660 were 2.5 times more likely to receive high-cost loans than whites. For Latinos, the figure was 2.1 times.
In addition to getting Wells Fargo to stop the alleged discriminatory practices, the city is also seeking unspecified monetary damages.
Correction: An earlier version misstated the source of the estimate for fake accounts.
Watch: Lawyers seek to expand Wells Fargo fake account investigation