NYC won’t open Wells Fargo accounts over racial disparities

New York City vowed not to open any new bank accounts with Wells Fargo & Co. after a Bloomberg News investigation found the bank approved Black homeowners seeking to refinance mortgages in the pandemic at a far lower rate than white ones.

In a joint letter to Chief Executive Officer Charlie Scharf last Friday, New York Mayor Eric Adams and Comptroller Brad Lander pointed to what they called the “checkered history” of Wells Fargo’s mortgage business going back to the 2008 financial crisis when the bank and others were accused of steering Black applicants into high-interest subprime mortgages.

“In light of this persisting track record of discrimination, New York City will not be opening any new depository accounts with Wells Fargo Bank, N.A. as we continue to investigate these troubling findings,” the two officials wrote.

In a statement responding to the letter, Wells Fargo said its mortgage operations treat customers consistently, regardless of their race or ethnicity, and that the firm is “deeply disturbed by irresponsible allegations of discrimination that we believe do not stand up to scrutiny.” The company also pointed to contributions it’s made to the city, including financing for 92 affordable housing projects, funding for community development and nonprofits, and the expansion of its New York workforce.

Wells Fargo approved just 47% of Black homeowners who completed applications to refinance mortgages in 2020 compared with 72% of white applicants, Bloomberg reported last month. In 2021, its approval rate for Black applicants increased to 58% but continued to lag behind white homeowners, 79% of whom had their bid to refinance approved. In both years Wells Fargo’s approval rate for Black refi applicants trailed other major banks and nonbank lenders.

The move by Adams and Lander is unlikely to have immediate consequence for Wells Fargo or for the city. The bank was put back on a list of financial institutions approved to do business with the city last year after being dropped in 2017 amid concerns about discriminatory lending. The city said in a statement that it currently has no deposit accounts with Wells Fargo.

But the demand for answers adds to scrutiny from lawmakers in Washington who asked the Consumer Financial Protection Bureau and the Department of Housing and Urban Development to examine Wells Fargo’s lending practices after the Bloomberg investigation was published.

The bank also faces at least three lawsuits from Black homeowners over its refinancing practices.

“Minority homeownership and access to financing is a significant problem in this country,” the bank said in its statement Friday. “And Wells Fargo has been and remains committed to being a leader in taking action to help close this and other racial equity gaps.”