Wells Fargo will use $125 million to compensate affected borrowers. The remaining $50 million will go toward helping people in eight metropolitan areas' minority communities, including Baltimore's, make down payments or improve their homes. The Justice Department says Wells Fargo engaged in a pattern of systemic discrimination in which some 30,000 minority borrowers across 36 states were charged higher fees and interest rates than their white counterparts. A black borrower in Chicago, for example, paid an average of nearly $3,000 more in fees than a white applicant who had the same credit rating. A Latino borrower paid more than $2,000 extra. The average "surtax" for a black borrower in the Miami area in 2007 was $3,657. In addition, Wells Fargo steered some 4,000 minority borrowers with good credit toward subprime loans — which are usually reserved for those with shaky credit, and have interest rates that often spike after several years.
Though it's coughing up a massive settlement, the bank did not officially admit wrongdoing, and claims that it settled the case "solely for the purpose of avoiding contested litigation" with the government. The bank stopped issuing subprime loans in 2008.
The Justice Department's case against Wells Fargo stems from a lawsuit filed by the city of Baltimore, which found that its minority communities were decimated by the housing crisis. In late 2011, Bank of America settled a similar discrimination lawsuit in which it paid out $335 million.
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