Group Attacks Wells Fargo

ACORN, or the Association of Community Organizations for Reform Now, announced that over 125 of its members will travel to Wells’ San Francisco headquarters to confront top managers about abusive loans. While members protest and hold a speakout outside the building, a group of ACORN leaders will attend the meeting, and speak in support of a shareholder resolution presented by the Coalition for Responsible Wealth.

“[Wells] has been rewarding its CEO with more money every six hours than many of us support our families on for an entire year — at the same time they’re ripping off working families with predatory loans,” ACORN Board co-chair Fannie Brown said in a written statement. “We are going to the shareholder meeting to say that this must change.”

“We are at a loss to understand exactly what it is that ACORN wants,” said Wells in an e-mailed statement, adding that the company “does not engage in fraudulent or abusive lending and we strongly oppose the use of deceptive, predatory or abusive lending practices by anyone in the marketplace.”

ACORN pointed out that Wells’ Richard Kovacevich, was the tenth-highest-paid chief executive officer in the nation last year, making $35.9 million, or more than $95,000 per day.

“Meanwhile, ACORN members and others in our communities wake up every morning worried about how they’ll keep up on their payments on predatory Wells Fargo loans, with their homes at stake,” Brown added.

The shareholder resolution calls for the financial thrift’s executives’ pay to be contingent with their performance on preventing predatory lending, said Betsy Leondar-Wright, a spokeswoman for Responsible Wealth — an organization that says some of its members are Wells shareholders and that it is made up of the wealthiest 5% of Americans concerned with the dangers of excessive inequality of income and wealth in the nation. The proposal asks that Wells initiate meetings with concerned community groups, consider implementing policies to prevent abusive lending, and reduce associated complaints filed with government bodies.

Wells practices that ACORN said it is protesting include financing high and often hidden fees into loans; engaging in bait-and-switch tactics, such as promising low rates on loans then making them at higher rates; charging excessive rates with expensive prepayment penalties; using marketing and pricing techniques that mislead borrowers to refinance perfectly good existing mortgages into much higher cost loans; failing to have rigorous policies in place to ensure that borrowers with similar circumstances are treated equally or that borrowers with A credit get loans at A rates.

“Engaging in these practices can be extremely costly to companies and their shareholders,” said Responsible Wealth co-director Scott Klinger in a written statement. Within the last two years, the organization said it proposed resolutions at both Citigroup and Household International stockholder meetings and subsequently, the companies respectively paid $200 million and $484 million to settle predatory lending complaints.

ACORN warned that “Wells practices leave them vulnerable to similar possible costs” and said it worked with Responsible Wealth against Household, which was also required to adopt dramatically changed lending practices. In July, Dan Porter — former CEO of Wells’ subprime division Wells Fargo Financial — resigned shortly after ACORN started a campaign against the company’s abusive practices.

Leondar-Wright, however, said that because the San Francisco mortgage giant has failed to reform their lending practices, the resolution additionally asks that instead of Wells self-certifying they’re not predatory lenders, they use outside auditors to evaluate subprime loans for compliance with laws and company policies.

Responsible Wealth highlighted that in 2003, California regulators fined Wells $38 million for failure to meet state disclosure standards when mailing draft loans, or “live checks” to prospective borrowers. While Wells later announced it had corrected the disclosure problem, regulators found evidence of continued violation and brought additional “willful disregard” charges against the company, which are still pending.

But, even if the resolution was approved by a majority of the shareholders, it would not be required by law that Wells implement it, Leondar-Wright said. She and ACORN spokeswoman Allison Conyers both agreed that they are not expecting the resolution to get a majority vote.

However, the outcome will be good anyway, because “we’ll be letting it known that we aren’t going to stand for Wells Fargo to continuing these predatory lending practices,” Conyers said.

Leondar-Wright said that because the pressure from shareholders, consumers and concerned individuals has previously played an important role in other companies adopting reforms, the protest and resolution will hopefully be “a wake up call” for Wells to do the same.

“Our reputation for honesty, integrity and commitment to customer satisfaction and community involvement is the core of our visions and values for this company, and we have an excellent track record of treating our customer fairly,” Wells said. “The sales practices of our consumer finance business, mortgage business and all our 80+ businesses are among the best in the industry and, in most respects, meet or exceed what ACORN has demanded from other lenders. We simply don’t understand their actions.”