Wells Fargo settles lawsuit alleging hiring, lending discrimination

• Key insight: A federal judge in San Francisco approved a settlement agreement between Wells Fargo and shareholders who accused the bank of discriminatory hiring and lending practices.
  
• What's at stake: Final court approval of the settlement, which includes a $100 million mortgage assistance fund, resolves a complaint filed in 2024. 
  
• Forward look: Terms of the settlement call for the bank to launch the assistance fund by the end of summer.

Wells Fargo has received final court approval of a settlement that will require the bank to create a $100 million fund to provide mortgage assistance to low- and moderate-income borrowers.

The settlement, which was approved Friday by a U.S. district court judge in San Francisco, puts an end to a 2024 complaint by shareholders who accused certain Wells' executives and board directors of failing in their fiduciary duty to properly guard against discriminatory lending and hiring practices. The bank and the shareholders agreed to preliminary settlement terms last fall.

The mortgage-assistance program will be available to qualified borrowers residing in or planning to purchase a home in certain low- and moderate-income census tracts in more than 50 regions in the U.S., according to the settlement. The assistance program must begin within three months of the approval order and it must be in place for at least three years. In the majority of the regions, borrowers will be eligible for both downpayment assistance and closing cost credits.

In her final approval order, U.S. District Court Judge Trina Thompson called the settlement "fair and reasonable." Plaintiffs "faced significant risks," including the fact that the mortgage fund may not have been guaranteed after a trial, "given the possibility of protracted appeals," she said.

Launching the mortgage fund "represents a meaningful step toward expanding equitable access to financial services," Thompson wrote in the order. "For many individuals and communities historically excluded from traditional lending pathways, this program signals a shift toward more inclusive underwriting practices and a deeper recognition of systemic barriers."

A Wells Fargo spokesperson said Monday that Wells is "pleased to have reached a settlement."

Three law firms — Cotchett Pitre & McCarthy LLP, Motley Rice LLC and Bleichmar Fonti & Auld LLP — served as co-lead counsel for plaintiffs in the litigation.

Tyler Redenbarger, a partner at Cotchett, Pitre & McCarthy, said in a press release announcing receipt of final approval that "the settlement represents meaningful progress in addressing discrimination by implementing a program that provides real support to individuals who have historically faced financial discrimination and have lacked access to programs of this kind."

Questions about Wells Fargo's hiring practices arose in May 2022 when the New York Times reported that Wells conducted "fake interviews" with nonwhite and female job applicants, in order to meet certain internal requirements related to interviewing diverse candidates.

The $2.2 trillion-asset bank, which at the time was facing several regulatory orders, including a $1.95 trillion-asset cap, temporarily paused its diverse-hiring guidelines. It then reinstated them a few months later.

Separately, Wells has also reached an $85 million settlement, related to accusations involving diverse job candidates. The final court approval for that settlement has not yet been received, the Wells spokesperson said Monday.

In September 2022, two Wells Fargo shareholders filed separate lawsuits against the company, alleging discriminatory lending and hiring practices. A series of legal actions followed involving more shareholders, and in May 2024, lead plaintiffs filed a consolidated amended complaint, alleging claims of breaching fiduciary duties and other accusations, according to the initial settlement order. A second consolidated amended complaint was filed in October 2024.

The two parties eventually agreed to a settlement. As part of the settlement, Wells Fargo denied any wrongdoing and liability, and said it was only agreeing to a settlement "to avoid the cost, disruption and uncertainty of further litigation," according to the initial settlement order.

As part of Friday's approved settlement, $10 million will be paid to Wells Fargo by the insurers of Wells' board directors who were named as defendants, according to the final approval order. The payment is related to directors and officers liability insurance.