Student loan lending may be big business for traditional banks, but for Wells Fargo, the hits keep coming. Just months after the Consumer Financial Protection Bureau fined Wells over its student loan servicing practices, the San Francisco-based bank is facing a lawsuit filed by the Mexican American Legal Defense Fund. The suit contends Wells denied borrowers loans due to their immigration status. The lawsuit, launched in late January, is taking on new meaning given President Trump’s shift in immigration policies and his directive to deport an increasing number of undocumented immigrants. Fears are reverberating through immigrant communities that the Deferred Action for Childhood Arrivals, or DACA program, will be rescinded.
Put on the books by former President Obama in June 2012, DACA gives undocumented immigrants who came to the U.S. as children a deferred action from deportation, along with making them eligible to work. The deferred action status is renewable every two years. “If the president rescinds DACA, it may be more difficult to make the argument that a person qualifies as a borrower for a student loan,” says Maurice H. Goldman, an immigration attorney in Tucson, Ariz., at Goldman & Goldman PC. According to Pew Research, more than 750,000 young unauthorized immigrants have received work permits and protection from deportation because of DACA.
Wells Fargo denied loan despite DACA status
At the heart of the lawsuit against Wells Fargo, brought by MALDEF and New York-based law firm Outten & Golden LLP on behalf of college students with DACA status, are allegations that Wells Fargo violated a state law that prevents a financial institution from discriminating based on their immigrant status.
The plaintiffs contend they were denied student loans by Wells Fargo because they said they weren’t U.S. citizens or permanent residents on their loan applications. “Our clients allege that Wells Fargo’s company-wide policy and practice of denying individuals the right to contract for a loan based on alienage is discriminatory under California and federal law,” said Ossai Miazad of Outten & Golden in a press release announcing the lawsuit. “This lawsuit should serve as a warning that banks must meet their obligations under the law.”
The groups are also seeking class-action status to include people turned down for loan products by Wells Fargo due to their immigration status who met all of the bank’s identification program guidelines.
Wells Fargo denies the allegations in the lawsuit, but Candy Marshall, president of TheDream.US, a national scholarship program for undocumented, DACA-eligible students, contends the bank – based on its actions – discriminated due to immigration status. She says there’s a misconception among student loan lenders that DACA borrowers are not creditworthy.
Marshall says TheDream.US scholars progress to their sophomore year of college at a higher rate than the nationwide average of 70 percent. “Because college was not given to them, they are highly motivated and determined to take advantage of that opportunity,” she says.
According to Goldman, the case against Wells Fargo will come down to whether lenders can use residency status as a factor to determine if a person qualifies for a loan. Because Wells Fargo is a private lender, it can decide to whom it wants to lend money, but it can’t run afoul of discrimination laws, he says. “Whether or not the lawsuit will prevail in the court is difficult to say but it’s definitely a problem we see with people having issues getting loans from banks,” Goldman says.
He points to past cases in which people with visas got turned down for a mortgage because they couldn’t prove permanent residency. “At the end of the day, when you are looking for loans, it’s about the best interest rates and a good relationship. A lot of people in our area that are undocumented or have DACA tend to go to credit unions because they are more willing to lend.”