Wells Fargo Challenged on Predatory Lending

Press Release
For Immediate Release:
April 21, 2005
Contact: Betsy Leondar-Wright
(617) 423-2148 x113

Wells Fargo Challenged on Predatory Lending

Borrowers and Shareholders to Bring Resolution to Annual Meeting

Two women at opposite ends of the economic divide will collaborate next week to confront one of the nation's largest subprime lenders, Wells Fargo.

Shareholder Marnie Thompson of Greensboro, NC, a member of Responsible Wealth, has turned over her proxy for next week's annual meeting to Cecilia Campillo of Tucson, AZ, who went bankrupt after a costly and deceptive mortgage refinancing by Wells Fargo.

Ms. Campillo will tell her story at the Wells Fargo annual meeting, to be held at 420 Montgomery Street in San Francisco at 1 pm on Tuesday April 26.

She and Chris Jones of ACORN will present a resolution, filed by several Responsible Wealth members, that calls on the company to make CEO pay contingent on improving predatory lending practices. The CEO of Wells Fargo, Richard M. Kovacevich, received over $52 million in total compensation in 2004.

Wells Fargo actively solicited Cecilia and Abelardo Campillo, now aged 66 and 75, to refinance their home. In 1998, the couple wanted a loan for their son's college tuition, but they were given only the option of refinancing, not a home equity loan. The new loan had an interest rate of 9.4% and $7000 in closing costs, which meant that they got less tuition money than they needed. In 2000 they again refinanced with Wells Fargo to get money for some home repairs. The new loan had an exorbitant 11.67% interest rate, $9000 in closing costs, and a life insurance policy they didn't want. The monthly payments were more than they had been led to expect and more than they could afford. Only when approached by a credit counseling agency did Wells Fargo lower the Campillos' interest rate to 8.37%.

Marnie Thompson said, "When I heard Cecilia Campillo's story of being strong-armed into borrowing under punishing terms that actually stripped her of the equity she had built up, I knew this was not a sustainable way to operate for any of us -- for me as an investor, for Wells Fargo as a company, or for borrowers like Ms. Campillo. I am honored to extend my proxy to Ms. Campillo so she can share her story with the company's executives and Board members, as the first step in setting a more sustainable, fair way of doing business." Thompson works for the Educational Testing Service and is active in racial justice community organizations in Greensboro, NC.

Julie Goodridge, President of NorthStar Asset Management, lead filers of the proposal added, "Wells Fargo's earnings have been boosted by lending practices that treat their most economically vulnerable customers -- the working poor, people of color and the elderly -- unfairly. As shareholders, we don't want to benefit from those kind of profits."

Thompson, Margaret Covert of NorthStar and Scott Klinger, co-director of Responsible Wealth, joined representatives of several fair housing advocacy groups, including the Coalition for Responsible Lending, in meeting with executives of Wells Fargo's finance company subsidiary about their lending practices. The group is hopeful that the company is open to change, but Klinger said, "Sending the stagecoach through poor neighborhoods, extracting wealth through predatory practices and then depositing the collected gold at the doors of Wells Fargo executives is not only wrong, it also creates financial risks for shareholders."

Members of ACORN will travel from several states to demonstrate outside next week's meeting.

Wells Fargo has lagged behind other companies that have eliminated predatory practices. For instance, following a similar campaign led by the Coalition for Responsible Lending and supported by a similar Responsible Wealth proposal, Citigroup agreed to cap fees, reduce prepayment penalties and ensure that all customers received rates appropriate to their credit history, regardless of which division of the company handles the loan application.

In contrast, Wells Fargo still charges six months' interest for loan prepayment penalties before three years, a far more onerous amount than is standard in the subprime lending industry. The company also charges customers with identical credit scores different rates, depending on the subsidiary with which they do business.

Responsible Wealth (http://www.ResponsibleWealth.org) is a project of United for a Fair Economy, a national, independent non-profit that spotlights growing economic inequality and advocates shared prosperity.