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Court of Appeals hands Wells Fargo victory over Los Angeles in fair housing lawsuit

Appeals upholds lower court’s dismissal of discriminatory lending suit

Wells Fargo may be facing a lawsuit from the city of Philadelphia over alleged discriminatory lending practices against minority borrowers, but a federal Court of Appeals just handed the bank a victory in a similar lawsuit brought by the city of Los Angeles back in 2013.

Four years ago, the city of Los Angeles sued Wells Fargo, Citigroup and Bank of America for discriminatory lending, saying that the banks violated the Fair Housing Act and were to blame for a wave of foreclosures that blighted the city.

But a district judge threw out the city’s lawsuit against Wells Fargo in 2015, stating that the city did not prove its case that the bank's policies led to minority borrowers ending up in higher cost loans.

The Los Angeles city attorney appealed the ruling, but the Court of Appeals for the Ninth Circuit ruled last week in Wells Fargo’s favor and upheld the lower court’s ruling.

In the four-page ruling, three of the court’s judges ruled unanimously that that lower court ruled appropriately because Los Angeles “did not show a discriminatory loan” during the time period in question.

According to the appellate court ruling, Los Angeles claimed that Wells Fargo had three separate policies that caused minority borrowers to receive higher cost loans, including: Wells Fargo’s compensation scheme, which the city argued incentivized loan officers to push minority borrowers into higher cost loans; Wells Fargo’s marketing, which the city said targeted low-income borrowers; and the city’s claim that Wells Fargo did not “adequately” monitor its loans for disparities.

But the Court of Appeals claims that the city “failed to demonstrate how the first two policies were casually connected in a ‘robust’ way to the racial disparity, as they would affect borrowers equally regardless of race, and the third is not a policy at all.”

The city also claimed that it suffered “injuries” in the form of lost tax revenue and increased spending due to foreclosure-related issues, but the court ruled that those injuries did not “confer a benefit” to Wells Fargo – which means that Los Angeles did not prove that its “unjust enrichment” claim against the bank.

In a statement, Wells Fargo said that it is eager to move past this lawsuit.

“We are pleased with the appellate court’s very quick decision to uphold the district court’s thoughtful ruling and to confirm the dismissal of the Los Angeles City Attorney’s mortgage case against Wells Fargo,” the bank said in a statement. “We will continue our focus on helping to expand home ownership opportunities in the city and across the country.”

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