UPDATE 1-Philadelphia sues Wells Fargo over alleged predatory lending

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May 15 (Reuters) - The City of Philadelphia has sued Wells Fargo & Co, accusing the largest U.S. mortgage lender of predatory lending, which violates the federal Fair Housing Act.

Monday's lawsuit came two weeks after the U.S. Supreme Court said cities can sue banks for alleged discriminatory practices that cause a disproportionately large number of defaults by minority borrowers, and harm to cities themselves.

The lawsuit adds to legal woes afflicting San Francisco-based Wells Fargo, which has since September been beset by a scandal over its employees' creation of unauthorized customer accounts to meet sales goals.

Wells Fargo, in a statement, said the allegations were "unsubstantiated" and do not reflect how the bank operates.

Philadelphia accused Wells Fargo of intentionally steering minority borrowers into higher-cost loans than white borrowers, even if they qualified for less risky, lower-cost loans.

The city said black borrowers were more than twice as likely to receive costlier, riskier home loans from Wells Fargo than similar white borrowers, while Hispanic borrowers were roughly twice as likely.

Philadelphia faulted what it said was Wells Fargo's "long history" of "red-lining" in the city and said the bank's practices reflected a "total breakdown of appropriate internal controls" similar to the creation of unauthorized customer accounts.

The complaint was filed in Philadelphia federal court.

It seeks a halt to the alleged discriminatory lending, plus a variety of damages.

The Supreme Court ruling involved similar charges by the city of Miami, Florida, against Wells Fargo and Bank of America Corp.

The case is City of Philadelphia v Wells Fargo & Co et al, U.S. District Court, Eastern District of Pennsylvania, No. 17-02203. (Reporting by Jonathan Stempel in New York; Editing by Dan Grebler)