Wells Fargo was recently hit with another discrimination suit in the state of Illinois. This is the second high profile lawsuit alleging that the company has engaged in predatory lending in black and Latino neighborhoods. The suit was filed by Illinois Attorney General Lisa Madigan and presents evidence that black and Latino customers were being guided toward higher cost loans even when they qualified for lower cost loans.
Obviously, these lawsuits are not good PR for a company that is one of the primary sponsors for Tavis Smiley's yearly State of the Black Union event.
"I'm talking of the worst of the worst bad loans that were sold in the run-up to the collapse of the housing market," the attorney general said in a press conference about the suit.
The attorney general should be commended for taking on this lawsuit. Just a few months ago, Wells Fargo was accused of engaging in similar practices in black neighborhoods in the city of Baltimore. Christopher Chestnut, a prominent attorney in the state of Florida who pursues racial bias cases, stated that, "The factual allegations plead in both Illinois and Maryland courts indicate a trend of predatory inequity in lending by Wells Fargo. The alleged behavior is alarming, depressing and unnecessary."
Mr. Chestnut is right. There appears to be a pattern in Wells Fargo's business practices and hopefully its day in court will reveal any possible deception. Genma Holmes, a blogger and entrepreneur concerned with social justice, has taken it upon herself to challenge Tavis Smiley and those connected to the State of the Black Union for their decision to promote Wells Fargo within the black community. In light of Smiley's campaign to hold President Barack Obama accountable, Holmes has argued that Smiley himself should be held accountable for his business relationship with Wells Fargo.
My position on this issue is clear: Companies found to discriminate should be taken to task, and we are fortunate to have an attorney general within the Obama administration (Eric Holder) who might be willing to do that. At the same time, predators are less likely to make you into a victim if you protect yourself from being good prey. This means that educating our children on financial literacy is critical, so they know how to shop for the best loan products when buying a home. Additionally, broader financial training in the black community could be beneficial to ensure that we don't buy into the latest products being presented by companies who simply choose the right spokesperson. There is no substitute for education and preparation. Perhaps Tavis Smiley's great book, 'Covenant with Black America' should include a chapter on fighting predatory lending. Given his relationship with Wells Fargo, I hope that wouldn't be a conflict of interest.
While the Wells Fargo suit is going to be interesting, there is a more general and painful economic devastation occurring in the black community. Black unemployment is nearly twice that of whites, and having lower wealth levels also implies that our community has a smaller financial cushion to soften the jobs disparity. But in the midst of darkness there is always an opportunity to grow, so perhaps our financial challenges will help us focus on more important values in our community. We've made it through much worse, and we are certainly going to make it through these difficult times.
Dr. Boyce Watkins is a Finance Professor at Syracuse University and author of "Financial Lovemaking 101: Merging Assets with Your Partner in Ways that Feel Good." To have Dr. Boyce commentary delivered to your email box, please click here.
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