Wells Fargo & Co. and its subsidiary Wells Fargo Financial were named today in a lawsuit that accuses the financial company of engaging in predatory lending of sub-prime mortgages and equity loans to low-income borrowers.
The suit, filed on behalf of the Association of Community Organizations for Reform Now, alleges Wells Fargo engages in a “bait-and-switch” plan that solicits targeted homeowners to refinance their debt on more favorable terms. According to the suit, however, the borrowers are presented at closing with terms different than those initially offered, including higher points and higher interest rates.
The suit also alleges Wells Fargo failed to inform borrowers with good credit that they could qualify for loans on better terms than those offered by Wells Fargo Financial.
In a statement, Mark Oman, group EVP of home and consumer finance for Wells Fargo, said the company had not yet seen the lawsuit, but that the group has taken facts about Wells Fargo Financial’s customer relationships out of context to paint a misleading picture. He said the allegations “are false and totally contrary to our ethical standards and business practices.”
“It’s very simple,” Oman said. “We do not tolerate any attempt to sell a customer any product or service unless the terms are fully disclosed. We do not lend to customers unless we believe they can make loan payments, period. The credit we extend must product demonstrable benefits for customers, such as reducing their interest rate or monthly payment, their total amount of payments or helping correct a delinquency on a previous real estate-secured loan.”
ACORN is made up of low- and moderate-income families across the country.
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