Lawsuit accuses Wells Fargo of using Net to discriminate

In a new twist on a familiar allegation against home lenders, the bank is accused of using the Internet to discriminate against minorities and encourage racial segregation.

Sept. 6, 2002 6:58 p.m. PT

3 min read

In a new twist on a familiar allegation against home lenders, Wells Fargo Bank was accused today of using the Internet to discriminate against minorities and encourage racial segregation.

The allegations center on Wells Fargo's "Community Calculator," an online search engine designed to help prospective home buyers shop for suitable neighborhoods.

The problem, according to an amendment to a civil lawsuit in Dallas federal court, is that San Francisco-based Wells Fargo uses racial descriptions to categorize neighborhoods depicted as downtrodden areas.

The suit also alleges that the site steers "residents of predominantly minority ZIP codes to other predominantly minority ZIP codes." The site also funnels residents of white neighborhoods to other white neighborhoods, the suit alleges.

Wells Fargo's Internet descriptions include "low income" neighborhoods, where 86 percent of the residents are blacks who "tend to purchase fast food and takeout food from chicken restaurants."

Another category is "Middle Class Urban Families," where 90 percent of the residents are black and wine coolers are popular. The community calculator identifies another low-income neighborhood category as "West Coast Immigrants," where 70 percent of the population is Hispanic and speaks Spanish at home.

In a sample submission made by the Associated Press today, these three categories also appeared next to "distressed neighborhoods," where 40 percent of the residents receive some type of public assistance and 25 percent are unemployed.

"They are including some of the worst racial stereotypes possible," said Michael Daniel, a Dallas attorney who filed the suit on behalf of the Association of Community Organizations for Reform Now, a nonprofit group. "With all the fuss about police profiling, can you imagine what would happen if this sort of thing were on a cop Web site?"

In a statement, Wells Fargo said it is only trying to help home buyers find the right place to live.

The Community Calculator "is designed to help customers make informed buying decisions using criteria such as education levels, housing characteristics, household by type, crime index and population," Wells Fargo said. "The Community Calculator is not designed to use race as a tool to guide home buyers' decision-making."

The bank declined further comment until its lawyers reviewed the suit.

Arlington, Va.-based CACI Market Systems developed the neighborhood profiles listed on Wells Fargo's Web site. A CACI representative said no one was available to comment on the ACORN suit today.

The suit, alleging violations of the Fair Housing Act, seeks a court order that would force Wells Fargo to remove the racial descriptions from its Web site and "any other appropriate relief."

Accusations of racial discrimination are nothing new in the banking industry. For years banks have been lambasted by community activists who allege banks avoid doing business in heavily populated minority neighborhoods--a practice known as redlining.

The redlining complaints spurred lawmakers to require home lenders to make annual disclosures about the volume of minority loans.

ACORN alleges the data filed with federal regulators shows that Wells Fargo's mortgage unit, previously known as Norwest, compiled an abysmal lending record to minorities. An ACORN member, Ruth Isaac of Dallas, first filed a suit against Norwest in April because of statistics showing the mortgage lender made only a handful of home-purchase loans in black and Hispanic neighborhoods from 1996 to 1998.

Daniel amended the suit today to include ACORN, which has 125,000 members, as a plaintiff and introduce the allegations that Wells is using its Web site as a discriminatory tool.

In its statement, Wells Fargo said that it has been the nation's leading mortgage lender to ethnic minorities for the past five years.

Daniel said he expects to file suits similar to today's complaint against other lenders and Web sites engaging in practices similar to those at Wells Fargo.