In court filings, the plaintiffs argue that Enhanced Credit Score disproportionately sent Black and Latino applicants to higher-risk classes, subjecting them to more underwriting scrutiny than other applicants and resulting in higher denial rates. Enhanced Credit Score generates a score that measures each applicant’s likelihood of default.

“Wells Fargo discriminated against the minority applicants by subjecting them to its discriminatory loan policies,” Dennis Ellis, the lead class counsel, wrote in a motion filed in April. He told Bloomberg in an interview that the credit ratings “were treated like a gold star or a scarlet letter.”

In response, Wells Fargo called the conflation of the firm’s front-end loan platform, internal and external underwriting systems, and thousands of additional rules and policies “counterfactual and logically incoherent,” and it said the proposed class was “overbroad and ill-defined,” Bloomberg reported.

Wells Fargo said its scoring model is a workflow tool and that there are no approvals through the Fannie and Freddie underwriting systems or Enhanced Credit Score. The systems merely indicate whether an applicant’s mortgage would be eligible for purchase by Fannie or Freddie.

If eligible, the application then moves to underwriting, and in-house underwriters verify documentation for income, employment and credit history. The internal model, Wells Fargo said, merely sorts applicants by the strength of their credit profile and then assigns higher-risk applicants to “more skilled” underwriters.

“This case has no merit, and we will continue to vigorously defend ourselves,” Wells Fargo said in a statement to Bloomberg. “Our underwriting practices are consistently applied regardless of race or ethnicity of the applicant. Any suggestions otherwise are simply inaccurate.”

Wells Fargo, once the largest depository mortgage lender in America, has significantly retreated from the residential mortgage space in recent years. It shut down its correspondent business in 2023, and said it would focus on its existing customers while developing special-purpose credit programs to improve racial equity.