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The news:Wells Fargo’s refinancing practices are under scrutiny by several US senators following a Bloomberg investigation that found the bank only approved 47% of Black homeowners’ mortgage refinancing applications in 2020.
More on this:
Sen. Sherrod Brown (D-Ohio), who chairs the committee that oversees banking, and several of his Democratic colleagues jointly issued a letter calling for an investigation into the bank’s refinancing practices. The letter was addressed to the heads of the Consumer Financial Protection Bureau (CFPB) and the Department of Housing and Urban Development (HUD).
Sens. Elizabeth Warren (D-Massachusetts) and Ron Wyden (D-Oregon) addressed a letter to Wells Fargo CEO Charlie Scharf requesting him to share, on or before March 28, 2022, the algorithms and data used for reviewing refinancing applications.
Wells Fargo’s approval rate for Black applicants was markedly lower than its 72% approval for white applicants, according to Bloomberg, which reported that the bank had the lowest rate for Black applicants among big lenders.
The banking giant denied any wrongdoing to Bloomberg and pointed to a 2020 internal review that found “other factors such as credit scores” explained the gaps. Wells Fargo declined to share 2021 refinancing information with Bloomberg.
The big takeaway: The senators’ focus may raise more questions about whether new technologies further discrimination.
The CFPB is already looking into whether unchecked AI practices in banking are harmful.
A similar review is happening among watchdogs in the UK.
Wells Fargo also faces another potential blow to its reputation, following others over the past decade such as:
Its 2016 fake accounts scandal, whose consequences included the Federal Reserve’s 2018 imposition of an asset cap.
Its 2012 agreement with the Department of Justice, which included a payout of over $175 million to settle accusations that it discriminated against Black and Hispanic borrowers.