Shareholders: Wells Fargo Wagon Driven by Predatory Lending

Press Release from United for a Fair Economy
For immediate release - April 21, 2004
Contact: Betsy Leondar-Wright, (617) 423-2148 x13

Shareholders: Wells Fargo Wagon Driven by Predatory Lending

BOSTON – At Wells Fargo’s annual meeting on April 27 in San Francisco, shareholders will vote on a resolution asking the company to link CEO pay to eradicating predatory lending practices. The proposal was filed by members of Responsible Wealth who are Wells Fargo shareholders.

Last year Wells Fargo's CEO, Richard Kovacevich, was the tenth highest paid CEO in the US, receiving $35.9 million in total compensation in 2003, according to Business Week. At the same time, his company has faced growing predatory lending controversies in its sub-prime lending business.

"This resolution seeks to assure shareholders that profits derived from taking advantage of poor people aren't winding up in the pockets of the CEO," said Dedrick Muhammad of Responsible Wealth, who will attend the annual meeting.

In evaluating predatory lending performance the proposal calls upon the company to consider implementing policies to prevent predatory lending; to use outside auditors to evaluate sub-prime loans for compliance with laws and company policies; to initiate meetings with concerned community groups; and to reduce predatory lending complaints filed with government bodies.

Wells Fargo, one of America’s largest and newest sub-prime lenders, provides real estate and consumer finance loans to borrowers with flawed credit. Sub-prime lending has long been fraught with predatory lending abuses. Predatory lending has stripped billions of dollars from borrowers who are often low-income, elderly or people of color, through inflated fees, loans made at rates higher than warranted by customers' credit scores, poor disclosure of loan terms, and in some cases, outright fraud.

“Engaging in these practices can be extremely costly to companies and their shareholders,” said Responsible Wealth co-director Scott Klinger. Within the last two years, Citigroup has paid $200 million, while Household International has paid $484 million to settle predatory lending complaints.

In 2003, California regulators fined Wells Fargo $38 million for failure to meet state disclosure standards when mailing draft loans (also known as “live checks”) to prospective borrowers. The company later announced that it had corrected the disclosure problem, but regulators found evidence of continued violation and brought additional “willful disregard” charges against the company. These charges are still pending.

In July 2003, Washington’s top banking regulator approved Wells Fargo’s merger with Pacific Northwest Bancorp. However, she warned that, “public allegations of predatory lending practice and underreporting of Home Mortgage Disclosure Act data by [Wells Fargo’s] non-bank affiliates and operating subsidiaries will be considered... in future examinations.” She also called on federal regulators to investigate these concerns.

“Wells Fargo falls short of other major industry leaders in developing policies that protect borrowers and shareholders from predatory lending abuses,” said Klinger. “Unlike other lenders, Wells Fargo has no public commitment to prevent customer discrimination and price overcharge. Unlike the practices of some of the best companies in the industry, Wells Fargo has no policies requiring that all mortgage refinances provide net benefits to borrowers.”

Responsible Wealth has been working closely with the grassroots community organization ACORN (http://www.acorn.org) on predatory lending, collaborating on three previous shareholder resolutions. ACORN has been campaigning against Wells Fargo's predatory lending. They have organized repeated protests at Wells Fargo's offices across the country, helped borrowers file complaints with regulators, and pressed government officials to bring Wells Fargo to justice.

Responsible Wealth has filed a similar predatory lending proposal with American International Group.

In addition, proposals calling for a report on the race and gender of those receiving stock options were filed by RW members at Coca-Cola, Exxon-Mobil, Verizon, and Wal-Mart. The Coca-Cola resolution was supported by 6% of shareholders at the company's April 21 annual meeting.


Responsible Wealth (www.responsiblewealth.org) is a national network of affluent Americans who are concerned about deepening economic inequality and advocate widespread prosperity.

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