Professor Comments on Wells Fargo’s Alleged Exploitation of African Americans

11 Jun

Dr. Christopher Richardson

Dr. Christopher Richardson, one of the world’s leading experts on predatory lending and banking, comments on a recent report that Wells Fargo, one of the sponsors of the State of the Black Union event held every year, is being sued by several government agencies due to accusations of financially exploiting and deliberately misleading the Black community.  Dr. Richardson’s comments are below:

“The article is on point.  Of course, accusations of predatory lending perpetrated by major banks are nothing new.  (As a former fair lending economist in the housing and civil enforcement section of the Department of Justice’s Civil Rights division, I should know.)  One problem not mentioned in the article is that there are virtually no federal laws prohibiting predatory lending like those that prohibit explicit discriminatory pricing or redlining.  It’s fairly straightforward to prove discrimination in a court of law if two borrowers, one Black and one White, go into the same bank at around the same time with similar credit profiles, apply for the same type of loan product, and the Black borrower walks out with a more expensive loan.  But most large lenders like Wells Fargo are smart enough to keep that from happening.  Instead, they have essentially two different banks–a prime bank (for lower-risk borrowers, with lower rates) and a subprime bank(for higher-risk borrowers, with higher rates)–and market the subprime bank in minority neighborhoods and the prime bank in the non-minority ones.  The advertising might be misleading, too, so as to make the subprime customers think they’re working with the prime bank ("Wells Fargo Financial" versus "Wells Fargo Home Mortgage" sound pretty similar, for example).  So if everyone in the prime bank is treated equally regardless of race, and likewise for everyone in the subprime bank, then the bank as a whole will look like it’s not breaking the law, even though it may be exploiting Blacks by running them all though the subprime bank.

There are several things that can be done to stop predatory lending.  I think the most important thing is to create strong federal anti-predatory lending laws that clearly define what types of loans can and cannot be made, whether prime or subprime.  Anti-predatory lending laws have to be federal to achieve consistent enforcement in all states.  And the laws have to be strictly enforced, either by the Justice Department or an independent agency of the sort Professor Elizabeth Warren proposed to Congress in her recent report on financial regulatory reform.  (Don’t let the bank regulatory agencies enforce predatory lending laws; they’re too deep into the pockets of the banking industry and vice versa to get the job done.)  More financial literacy can help but only so much, because the choices consumers make will only be as good as the options available to them.”

Advertisements

8 Responses to “Professor Comments on Wells Fargo’s Alleged Exploitation of African Americans”

  1. Angela Reynolds June 17, 2009 at 4:16 pm #

    My situation isn’t exactly the same, but I am in the process of trying to renegotiate my home loan which is now being taken over by Wells Fargo by Wachovia. I’m not seeing any results as yet that I will be able to keep my home, but if I do I’ll be dealing with Wells in the near future.

  2. Anonymous June 18, 2009 at 1:45 am #

    My house was financed by Ohio State Bank. One year later I got a letter saying I would make my next payment to Wells Fargo. The letter said it was nothing we had done, we made our payments on time, but the in the indusrty it was not unusual for banks to buy out other banks mortagages. I though it was strange. I am going to look into this carefully, because their maybe something going on here that I need to know about. Thanks for the information.

  3. interior design school new york May 23, 2013 at 11:29 pm #

    Do you have a spam problem on this blog; I also am a blogger, and
    I was wanting to know your situation; many of us have created some nice practices and we are looking
    to swap methods with others, why not shoot me an e-mail if
    interested.

Trackbacks/Pingbacks

  1. Dr. Christopher Richardson Explains Wells Fargo Alleged Discrimination « Dr Boyce’s Finance Class - June 11, 2009

    […] Click to read on African American Money. Technorati Tags: black money,black wealth,african american money,african american wealth,black professors,black scholars,african american scholars […]

  2. African American Money - June 12, 2009

    […] To read more of Dr. Richardson’s comments in detail, please click here. […]

  3. Black Professor Speaks on Tavis Smiley Sponsor Wells Fargo: Did they discriminate? « Black Money and Black Wealth, made simple - June 13, 2009

    […] Click to read on African American Money. Technorati Tags: black money,black wealth,african american money,african american wealth,black professors,black scholars,african american scholars […]

  4. Did Wells Fargo Discriminate? Chris Richardson Breaks it down « Black Public Scholars - June 13, 2009

    […] Click to read on African American Money. Technorati Tags: black money,black wealth,african american money,african american wealth,black professors,black scholars,african american scholars Comments (0) […]

  5. Prof Christopher Richardson Breaks down Tavis Smiley Sponsor Wells Fargo’s alleged discrimination « Black Leadership and Everything in It - June 13, 2009

    […] Click to read on African American Money. Technorati Tags: black money,black wealth,african american money,african american wealth,black professors,black scholars,african american scholars […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: