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(Consumer Reports) The U.S. Department of Justice is investigating allegations that Wells Fargo discriminated against African American borrowers, according to news reports. The allegations assert that the bank directed African-American borrowers to high-interest, subprime mortgages.

The DOJ is preparing a lawsuit against the bank, which is negotiating a settlement to avoid a public lawsuit, according to the Huffington Post. In a statement to the Huffington Post, Wells Fargo said it practiced responsible lending. "We have a very strong commitment to serving all customers along the credit spectrum, and we do so without bias."

The DOJ's investigation echoes a suit filed by the city of Baltimore against the bank, accusing it of targeting predominantly black neighborhoods with bad loans. Wells Fargo has denied the allegations.

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(Daily Finance) Wells Fargo’s (WFC) announcement earlier this week that it’s exiting the subprime mortgage business is economically sensible for the bank, given that today’s far more restrictive credit requirements pretty much put an end to subprime mortgages. It also closes a very dark chapter in Wells Fargo’s history.

Wells Fargo is one of the nation’s largest banks, but it’s had a questionable record with lending to the black and Hispanic community.

As former Wells Fargo loan officer Beth Jacobson told The New York Times in June 2009, Wells Fargo singled out blacks in Baltimore and suburban Maryland for high-interest subprime mortgages. Jacobson and another former Wells Fargo loan officer said in an affidavit that the bank’s employees referred to blacks as “mud people” and to subprime lending as “ghetto loans.”

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