By Jonathan Stempel
(Reuters) -Wells Fargo won't have to face class-action claims it systematically discriminated against hundreds of thousands of Black and Hispanic mortgage applicants, a federal judge ruled.
U.S. District Judge James Donato in San Francisco decided on Tuesday that the applicants could not sue as a group because they failed to show their claims were similar enough. Individual lawsuits are the alternative, he said.
The decision spares the fourth-largest U.S. bank from a potentially
larger payout, which the plaintiffs said could reach billions of dollars, than it might owe borrowers who could afford to sue one by one.
Wells Fargo was accused of "digital redlining" through its use of an automated underwriting system known as CORE, short for Common Opportunities Results Experiences, whose "race-infected lending algorithms" deemed minority applicants a higher risk.
The plaintiffs said this caused the San Francisco-based bank's to disproportionately deny mortgage and mortgage refinancing applications from minorities, while offering better terms to similarly qualified white applicants.
Donato, however, found no explanation for how CORE might have caused statistically significant disparities in approval rates, citing the plaintiffs' concession that even Wells Fargo didn't know.
"Plaintiffs wish to sue about hundreds of thousands of home loan decisions at once," Donato wrote.
"Without some glue holding the alleged reasons for all those decisions together," he continued, "it will be impossible to say that examination of all the class members' claims for relief will produce a common answer to the crucial question[:] why was I denied."
The plaintiffs are represented by civil rights lawyer Ben Crump and several other law firms.
Lawyers for the plaintiffs did not immediately respond to requests for comment on Wednesday. Wells Fargo declined to comment.
Donato ruled two months after the Federal Reserve lifted a seven-year-old asset cap it imposed after a series of scandals over how Wells Fargo treated customers. The central bank said Wells Fargo has improved its risk management and governance.
The case is In re Wells Fargo Mortgage Discrimination Litigation, U.S. District Court, Northern District of California, No. 22-00990.
(Reporting by Jonathan Stempel in New York; Editing by Mark Porter)
