US based banking major Wells Fargo has agreed to compensate nearly $175m to African-American and Latino borrowers who paid higher fees and rates than white borrowers.
Announcing the settlement with Wells Fargo, the US Department of Justice (DOJ) said that the bank was engaged in discriminatory lending practices against African-American and Hispanic borrowers, which affected more than 30,000 borrowers between 2004 and 2009.
The US’s biggest mortgage lender accepted that it has violated fair lending laws and under the compensation agreement inked, Wells Fargo will pay 1,300 people in the Inland Empire more than $3m in homebuyer assistance, while almost 4,500 victims in Los Angeles County will get over $10m in damages, the DOJ said.
Although, the bank has denied any wrong doing and justified its acts as saying that it was settling the matter "solely for the purpose of avoiding contested litigation" with the US government.
The department accused Wells for pushing nearly 4,000 borrowers into subprime mortgages when white borrowers with similar credit profiles received cheaper prime loans.
DOJ deputy attorney-general James Cole said the department’s action makes clear that financial institutions will be held accountable, including some of the nation’s largest, for lending discrimination.
"An applicant’s creditworthiness, and not the colour of his or her skin, should determine what loans a borrower qualifies for," Cole added.