Chicago Reporter's investigation leads to $175 million settlement with Wells Fargo for discriminatory lending practices

Chicago Reporter's investigation leads to $175 million settlement with Wells Fargo for discriminatory lending practices

It all started with our investigation.

Back in 2007, The Chicago Reporter wrote a story about  discriminatory lending practices in Chicago. High-cost loans were being doled out in the city's minority neighborhoods. Was it just coincidence, or were banks targeting communities of color for these expensive and complicated loans?

Today, Illinois attorney general Lisa Madigan and the Department of Justice announced a $175 million dollar settlement with one of those banks, Wells Fargo, after a three-year legal battle alleging that the mortgage giant discriminated against black and Latino mortgage-seekers.

“Wells Fargo’s discriminatory lending practices were illegal. They helped destroy a generation of wealth in African-American and Latino communities in the Chicago metro area,” Madigan said, in a news release, adding that her 2009 lawsuit was based on analysis of mortgage data done by the Reporter. “Today’s settlement holds Wells Fargo accountable and requires the bank to invest in and help revitalize the same communities it helped to destroy.”

Of that money, at least $15 million will go to Illinois homeowners who got a sub-prime loan through Wells Fargo between 2004 and 2009.

Chicago Reporter Publisher Kimbriell Kelly first uncovered the lending disparity along with our former-publisher Alden Loury. Check out their recap of the investigation:

According to Madigan's office, it's estimated that more than 3,300 people were victims of discrimination by Wells Fargo brokers, both through steering them into high-cost loans and charging them higher fees.

Those steered into inappropriate loans are expected to receive $15,000 in restitution, while pricing victims will receive an average $2,000 payment.

In addition to the people already identified by the attorney general's office, the company agreed to help identify additional victims who were discriminated against by Wells Fargo employees, who will also be eligible for compensation.

Wells Fargo denies any wrongdoing.

While the settlements mark closure to Madigan's lawsuit, "there are still stories to tell about the impact of this on African American communities," Loury said. Watch:

An independent administrator will contact identified borrowers and distribute payments. Anyone who believes they may have been a victim or wants more information can also email  wellsfargo.settlement@usdoj.gov for help.

Video by Angela Caputo.

© Community Renewal Society 2012

Photo credit: MoneyBlogNewz.

Comments

Leave a comment
  • Just curious. So at least $15 million will go to homeowners affected. What happens to the other $160 million? The State's Attorney's news release also said, "In addition, the settlement provides for an independent administrator, who will contact identified borrowers and distribute compensation payments." That's a lot of money for administrative overhead or does some of the money go somewhere else? For instance into the state's general fund, which doesn't sound right either?

  • Hey Jeff - great question. Thanks so much for asking.
    The $175 million was a settlement with Illinois, Baltimore, Pennsylvania and the DoJ. Of the $175 million, $50 million went to a half a dozen cities around the U.S. to help people improve their homes or make downpayments - not victims of the practices, per say, just everyday people. The rest of that $$ will be given to compensate individual borrowers. The $15 million is an estimate of what borrowers will get collectively based on how many victims we know we have now, although there may be more that come forward for compensation. Does that make sense?

    Again, great question and thanks for asking.

  • I was a victim of Wells Fargo's predatory lending. I am a south-suburban resident and I was given a 12% interest rate when I purchased the house. I am not sure if I am on the list to receive compensation. What is the best way to find out if I am supposed to receive compensation and when will they start distributing the funds?

  • In reply to Dee Dee:

    Dee Dee, thanks for your comment. According to Lisa Madigan's office, the best thing to do if you think you may be a victim is to contact the department of justice through this email: wellsfargo.settlement@usdoj.gov. I'm sure you can also call their homeowner help hotline for more information - 1-866-544-7151.

Leave a comment