A federal judge granted final approval to a $110 million settlement to resolve a shareholder lawsuit accusing Wells Fargo & Co. of discriminatory lending and hiring practices.
"Often, the largest asset a person or family has is a home. This settlement delivers real, tangible benefits for low- to moderate-income borrowers in census tracts that mirror the people allegedly discriminated against,” Motley Rice attorney Marlon Kimpson said in a statement.
The shareholder litigation, filed in 2022, alleged the bank’s board failed to oversee its mortgage practices, leading to Black applicants for refinancing being approved at a significantly lower rate in 2020. Under the settlement, Wells Fargo will provide $100 million to a borrower assistance program, with an additional $10 million paid by the directors' and officers' insurers.
The agreement resolves a significant legal uncertainty for the bank, though it highlights a history of compliance and ethical issues. The new Borrower Assistance Fund will provide grants and closing cost assistance in over 50 metropolitan areas for a minimum of three years, a move Judge Trina Thompson of the Northern District of California called a "win-win for everybody."
The lawsuit, which consolidated multiple cases, was brought by shareholders who argued that the bank's board breached its fiduciary duties. The complaint also cited allegations that Wells Fargo conducted fake job interviews with nonwhite candidates to satisfy internal diversity metrics. Law firms Motley Rice LLC, Cotchett Pitre & McCarthy LLP, and Bleichmar Fonti & Auld LLP served as co-lead counsel for the plaintiffs.
The settlement reinforces the importance of board-level accountability in complying with fair lending laws. While the financial penalty is manageable for a bank of Wells Fargo's scale, the establishment of the three-year assistance program creates a clear timeline for the market to monitor the bank's progress on improving its lending practices.
This article is for informational purposes only and does not constitute investment advice.
