The LA Times reports on the possible ramifications of the Wells Fargo false accounts scandal in light of the U.S. Supreme Court’s recent decision to allow mortgage discrimination cases against Wells Fargo and other bank giants to proceed. Noting that the Supreme Court decision is “more than just another bad headline” for Wells Fargo, the Times observes that the unauthorized accounts fraud — especially in light of Wells’ own admissions about its causes with respect to internal bank oversight — bolsters claims by cities and municipalities that Wells improperly steered minority home buyers into pricier mortgages than white buyers.
In lawsuits across the country, the cities are arguing that such bank practices contributed to thousands of foreclosures and attendant city blight, which decimated city property tax incomes and further strained public resources. Several of those cases, including the recently-filed case in Philadelphia, call out a report Wells Fargo itself commissioned that found the banks ongoing practice of opening unauthorized accounts persisted for years “because of a lack of proper oversight by executives and internal compliance officers.” Attorneys argue that same lack of oversight may well have contributed to ongoing mortgage discrimination, where Wells Fargo steered minority customers into mortgages more expensive than those offered to white borrowers with similar credit ratings.
Joel Liberson, one of the team of attorneys representing Miami, Philadelphia, and other cities in the mortgage discrimination cases, pointed out that better management and controls at Wells could have prevented such problems. “The practices and policies that led to looking the other way when it came to opening bank accounts and credit cards are the same practices and policies that may very well have given rise to discriminatory mortgage practices.” A key element of the cities’ argument, Liberson said, is that both the accounts scandal and the allegations of mortgage discrimination stem from a poorly supervised system of incentives that promoted unethical behavior.
“It’s one thing to say you had a business that was issuing unlawful products,” Liberson notes. “But one of the important questions a judge or jury is going to want to know is, why did that happen? How did that happen? What allowed it to happen? Those are important questions to answer.”
Read the full article on the LA Times website.