US bank Wells Fargo is to pay $175m to resolve allegations that it charged African American and Hispanic borrowers higher fees and interest rates than whites, the US Justice Department said.
The bank is accused of engaging "in a pattern or practice of discrimination against qualified African-American and Hispanic borrowers in its mortgage lending from 2004 through 2009."
Customers were also steered toward riskier sub-prime loans, while their white peers received standard loan terms, the Justice Department said.
''An applicant's creditworthiness, and not the color of his or her skin, should determine what loans a borrower qualifies for," said Deputy Attorney General James Cole.
The San Francisco-based bank denies the claims, according to a statement, but said it was settling to avoid litigation.
The bank will pay $125m in compensation to around 4,000 customers who paid higher fees than white borrowers. It will also pay $50m in direct aid to communities hard hit by the housing crisis.
