Wells Fargo & Company (NYSE:WFC) found itself in hot water with the Consumer Financial Protection Bureau last year during an investigation into potentially improper use of loan discounts, according to a report by CNBC.
The probe concerned a practice called price discrimination, which bankers use to offer discounts on mortgages to get deals done. At Wells Fargo, mortgage officers are able to lower a customer’s annual percentage rate (APR) by 25 to 75 basis points.
Price discrimination itself is nothing new, however, the CFPB found that Black and female customers received fewer of these discounts than other customers.
Wells Fargo was hit with a notice from the CFPB known as a Matter Requiring Attention (MRA), CNBC reported citing people familiar with the matter. The notice likely alleged either discrimination or poor oversight.
The probe, while not previously reported, extended into late 2023, according to these sources.
The report adds a potential new light to Wells Fargo’s decision in January to scale back its home lending business, which included references to minority homeowners.
“Mortgage is an important relationship product, and our goal is to continue to be the primary mortgage lender to Wells Fargo bank customers as well as minority homebuyers,” CEO of Consumer Lending Kleber Santos said in a statement at the time. “We are making the decision to continue to reduce risk in the mortgage business by reducing its size and narrowing its focus,”
“As the largest bank lender to Black and Hispanic families for the last decade, we remain deeply committed to advancing racial equity in homeownership,” Santos added.
The bank responded to the report in a statement on Monday.
“Like many in the industry, we take into consideration competitor pricing offers when working with our customers to get a mortgage,” a spokesperson said. “As part of our renewed focus on supporting underserved communities through our Special Purpose Credit Program, we have spent more than $100 million over the last year to help more minority families achieve and sustain homeownership, including offering deep discounts on mortgage rates.”
In a later statement, the bank added, “While we cannot comment on any regulatory matters, we don’t discriminate based on race, gender or age or any other protected basis.”
This is far from the first time Wells Fargo has run afoul of regulators.
In March, the bank was fined $97.8 million by the Federal Reserve and the Treasury Department for facilitating transactions that violated US sanctions laws.
Other scandals in recent years include the opening of fake accounts, illegal fees and interest charges on loans, and conducting false job interviews to meet diverse hiring goals.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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