On August 6, 2025, a federal judge in San Francisco ruled that Wells Fargo & Co. will not face a class-action lawsuit alleging systemic discrimination against Black and Hispanic mortgage applicants.
U.S. District Judge James Donato determined that the plaintiffs failed to demonstrate sufficient commonality among their claims, preventing the case from proceeding as a collective action.
This decision, detailed in the case In re Wells Fargo Mortgage Discrimination Litigation (Case No. 22-00990, U.S. District Court, Northern District of California), allows individual lawsuits to move forward but shields the bank from a potentially massive financial penalty.
The lawsuit, filed in 2022 by eight plaintiffs representing a proposed nationwide class, accused Wells Fargo of engaging in “digital redlining” through its automated underwriting system, referred to as Common Opportunities Results Experiences (CORE).
The plaintiffs alleged that this system disproportionately denied mortgage and refinancing applications from Black and Hispanic applicants while offering less favorable terms compared to white applicants with similar qualifications.
The claims cited violations of several laws, including the Equal Credit Opportunity Act, the Fair Housing Act of 1968, the Civil Rights Act, California’s Unruh Civil Rights Act, and California’s Unfair Competition Law.
According to the plaintiffs, Wells Fargo’s CORE system relied on algorithms that assigned minority applicants to higher-risk credit classes, leading to delays, denials, or less advantageous loan terms.
The lawsuit argued that the bank’s centralized, automated processes lacked adequate human oversight, exacerbating discriminatory outcomes.
Court’s Reasoning for Denying Class-Action Status
Judge Donato’s ruling hinged on the legal requirement for class-action lawsuits to demonstrate “commonality”—a shared issue or factor linking all plaintiffs’ claims.
In his decision, Donato stated that the plaintiffs failed to identify a unifying element tying together the hundreds of thousands of individual loan decisions they sought to consolidate.
He emphasized that without a clear, common reason for the alleged denials, the case could not proceed as a class action.
The court acknowledged that human underwriters, not the CORE system alone, made final lending decisions.
Wells Fargo argued that CORE served as a workflow tool, not a decision-making mechanism, and that a separate risk assessment system, guided by thousands of business rules and human judgment, determined applicant outcomes.
The plaintiffs conceded that human underwriters had the final say but maintained that the automated system’s influence created a disparate impact on minority applicants.
Implications of the Ruling
This decision is a significant win for Wells Fargo, the fourth-largest U.S. bank by assets, as it avoids a potential multibillion-dollar liability that could have arisen from a successful class-action lawsuit.
Individual plaintiffs, however, retain the right to pursue their claims separately, though such lawsuits typically result in smaller payouts and may deter some applicants due to the costs and complexity of litigation.
The ruling comes at a time when Wells Fargo is navigating other legal and regulatory challenges.
In June 2024, the Federal Reserve lifted a seven-year asset cap imposed after a series of consumer scandals, citing improvements in the bank’s risk management and governance.
However, the bank faces ongoing scrutiny, including a new class-action lawsuit filed in August 2024 alleging overcharges on mortgage loan modifications due to an unspecified “error” (Prado v. Wells Fargo & Company, Case No. 3:24-cv-05105).
The case highlights ongoing concerns about algorithmic bias in financial services, particularly in automated underwriting systems.
Critics argue that such systems can perpetuate historical inequities if not carefully monitored.
Wells Fargo’s defense that human underwriters ultimately control decisions underscores the tension between automation and accountability in modern banking.
The ruling may influence how similar lawsuits against other financial institutions are structured, as plaintiffs must now find stronger evidence of a common discriminatory mechanism to achieve class-action status.
It also raises questions about the effectiveness of current fair lending laws in addressing alleged digital redlining practices.
Wells Fargo’s Response and Plaintiff Representation
Wells Fargo declined to comment on the ruling, consistent with its approach to ongoing litigation.
The plaintiffs, represented by prominent civil rights attorney Ben Crump and several law firms, did not immediately respond to requests for comment.
Crump has previously highlighted regulatory findings from the Consumer Financial Protection Bureau, which identified “statistically significant disparities” in Wells Fargo’s mortgage pricing for Black and female borrowers.
While the class-action pathway is closed, individual lawsuits may still challenge Wells Fargo’s lending practices.
The outcome of these cases could set further precedents for how banks address allegations of discrimination in automated systems.
Meanwhile, the bank continues to face other legal actions, including a securities class-action lawsuit over its diversity hiring practices and an enforcement action from the Office of the Comptroller of the Currency regarding anti-money laundering compliance.
For consumers and advocacy groups, the ruling underscores the challenges of proving systemic discrimination in complex, algorithm-driven processes.
As the financial industry increasingly relies on automation, ensuring fair and transparent lending practices remains a critical issue.
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