Dec. 15, 2005 – Groups alleging that one of the nationâ€™s wealthiest financial firms engages in discriminatory lending practices staged a picket at the companyâ€™s headquarters yesterday. The groups are in a long-running campaign to force the firm to admit to and provide compensation for what critics term "predatory" lending. The protest at Wells Fargoâ€™s San Francisco offices garnered little media attention, but organizers considered it an important step toward wringing economic equity from the banking giant.
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Yesterdayâ€™s demonstration was aimed at highlighting allegations that Wells Fargo routinely adds surprise charges to mortgages taken out by minorities, with many rates rising well above 10 percent. As of last week, the average mortgage rate in the nationâ€™s largest cities hovered around 6.5 percent, according to the Associated Press.
Company shareholders and community activists reportedly joined the Association for Community Reform Now (ACORN) in picketing Wells Fargoâ€™s headquarters, as did members of Responsible Wealth, a philanthropic group, and the Community Reinvestment Association of North Carolina (CRA-NC), an advocate for wealth equality. The latter two groups have been negotiating with Wells Fargo over reforming its lending practices for most of the year, leading to minor concessions on payment penalties and other issues.
"We are glad that Wells Fargo has finally acknowledged the damage that their practices have been causing and has agreed to change some of them," ACORN President Maude Hurd said in a statement. "However, Wells still needs to compensate the families and communities its predatory lending has hurt, and to address the serious racial inequality in its lending."
Nationally, black Wells Fargo borrowers are nearly four times as likely to pay extraordinary loan rates as whites, according to information compiled by Responsible Wealth. Nearly 30 percent of blacks taking out first-year loans from the company pay high interest rates.
Facing the rising tide of dissent over purportedly racist lending practices this summer, Wells Fargo head Richard Kovacevich told Bloomberg news: "We are responsible lenders, and we price for risk; we don't price for race. We don't do predatory lending. And the American consumer is better off that we take that risk. We just have to get paid for it."
A CRA-NC study of loans taken out in North Carolina in 2004 found that blacks as a whole were four-and-a-half times more likely to incur high loan rates as whites. Acknowledging that income and credit-history factors could play into the disparity, the group called on banks to release data backing their contention that the difference is solely based on economic factors.
Last year, ACORN filed two lawsuits in one month against Wells Fargo alleging that it unfairly adds surcharges to loans to minority homebuyers and misleads many into accepting usurious rates on second mortgages. The suits have not been resolved.
According to the Center for Responsible Lending, financial institutions obtain more than $25 billion a year from low-income borrowers through mortgages, tax-return and payday loans, credit-card-debt consolidation schemes and other poorly regulated areas of finance. At least $9.1 billion coming from mortgages alone, the Center reports.
Only four states â€“ New York, Illinois, Arkansas and South Carolina â€“ have laws on the books that actively protect consumers from predatory mortgages, according to information provided by CRL. About half of all states have anti-abusive-lending laws.
Presently, there are no federal regulations specifically aimed at curbing abusive lending practices. The Treasury Department offers consumers advice on how to avoid and report such practices.