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Activists Push Los Angeles to Hold Its Bank Accountable

A coalition of elected officials, local residents and community leaders are encouraging Los Angeles’ City Council to require that any bank it does business with not engage in the kinds of unethical practices that helped mire the city’s current bank, Wells Fargo, in scandal.

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Photo: David Paul Morris/Bloomberg via Getty Images

A broad coalition of elected officials, local residents and community leaders are encouraging the Los Angeles City Council to require that any bank it does business with not engage in the kinds of unethical practices that helped mire the city’s current bank, Wells Fargo, in scandal. The San Francisco-based financial services giant has been rocked by revelations that its employees created as many as 3.5 million accounts nationwide without customers’ knowledge or consent. With a payroll services contract between the city and Wells Fargo about to expire, activists see this as the best opportunity in decades to demand accountability from any bank that contracts with L.A.

On August 17, the L.A. Community Review Board on Responsible Banking met at Gilead Missionary Baptist Church in South Los Angeles to examine ways to implement responsible banking practices that might help restore residents’ confidence in who the city banks with.

“The city does not have to do business with banks that hurt workers and customers in our communities,” U.S. Representative Maxine Waters told the panel and audience members.

Next week the City Council’s Budget and Finance Committee may consider adding new language to the Responsible Banking Ordinance, which the council passed in 2012 but never officially implemented. Addressing issues stemming from the 2008 financial crisis, the 2012 RBO included language for disclosure, and an annual ranking report that the city could use to give more business to a responsible bank, or take business away from an irresponsible bank.

Defining “responsible” and “values-based” is contentious, and advocates say they have been pushing for the strongest language possible to define these terms in the RBO’s new version. And they want that language to be part of the request for proposal (RFP) for all banking services. The final RFP for the city’s payroll services is expected to be released in December or January. The language in the RBO would also cover banking services, including investments and bonds/underwriting when those contracts are up for review.

“Our point of leverage is during the RFP selection process, which is right now,” says Maria Loya, Los Angeles Policy Director with the Committee for Better Banks, one of the lead organizations pushing for new ordinance language.

“The city has never submitted a ranking report card since 2012,” Loya said, echoing fears of many advocates that the city might be reluctant to hold its banking partners accountable.

Coming out of the August meeting at Gilead Church, the Community Review Board on Responsible Banking has released a report with specifics on what it wants – and doesn’t want – in the city’s banking partners. Among other recommendations, the board wants L.A. to give preference to banks that emphasize collective customer service rather than sales goals. And they want the city to contract with banks that don’t use sales performance as a factor in employee discipline or termination.

Advocates emphasize that aggressive sales quotas led to the Wells Fargo scandal.

“Commercial banking contracts are usually awarded to the lowest bidder,” Anastasia Christman, senior policy analyst at the National Employment Law Project told Capital & Main. “But a city can absolutely judge [a bank] with a values-based approach when choosing a partner to handle its assets and banking contracts, not just fiduciary.”

Earlier this year Wells Fargo agreed to pay $142 million in a bevy of class-action lawsuits for opening the unwanted and unauthorized accounts. It also agreed to pay $50 million to the city and county of L.A. in a lawsuit filed in 2015 by Los Angeles City Attorney Mike Feuer. The bank had stopped using sales quotas last year, but industry insiders say the practice of predatory sales quotas continues unabated at other banks.

For its 2016 report, “Banking on the Hard Sell,” the National Employment Law Project analyzed interviews with bank workers in branches and call centers across the country, including Wells Fargo, Bank of America, J.P. Morgan and others. Employees testified to a culture of aggressive sales goals, and explained common practices like “sandbagging” (processing customer account applications on the days they count the most towards a quota), “gaming” (opening accounts at any cost to meet a target) and “pinning” (assigning new PIN codes unbeknownst to customers to help add on products later). It’s those practices that the L.A. Community Review Board on Responsible Banking says should be unacceptable in a city’s banking partner.

One group behind the suggested new language for the RBO is the Alliance of Californians for Community Empowerment (ACCE). Several ACCE members testified at Gilead Church last month that they were either directly impacted by big banks, or as bank employees, perpetrated those actions. They claimed that huge bank profits come at the expense of seniors, low-income families, people of color and immigrants who are often targeted for unnecessary products.

Ruth Landaverde was a credit manager for Wells Fargo Financial in Palmdale, California in 2009 and 2010. She told Capital & Main that putting strong social responsibility language in the city’s banking RFP was a personal issue for her.

“I saw the impact the bank’s policies were having on customers and other employees,” she said.

Landaverde said she was required to cold-call customers with marginal or bad credit and tell them they were approved for credit cards at a very high interest rate. “We had to keep calling the clients and pressure them. We had clients come down to the branch and say ‘please stop calling me.’ But we would get written up if we didn’t hit our sales goals, and this was during the recession. We had to stay and work after hours to make more calls and hit our numbers.”

Landaverde said her tasks involved debt consolidation and refinancing, so she couldn’t open new accounts. “But I know some branch managers opened accounts without the clients’ knowledge.”

She added that the city’s RFP needs “strong and specific language” to prevent such sales goals and to protect bank whistleblowers.

Paulina Gonzalez, executive director of the California Reinvestment Coalition, said that, at a minimum, a city should choose a bank that does no harm to the community.

“The city should also consider how much a bank is reinvesting in a community, through business loans and other products. This is an opportunity for the city of L.A. to define what is responsible banking.”

Gonzalez added that, while Los Angeles hasn’t yet considered “values” when choosing a bank, there is precedent for doing so with other contractors. In 2000, the city adopted an ordinance requiring bidders to respond to a “Responsible Contractor Questionnaire,” and answer questions relative not only to financial resources and technical qualifications but a “satisfactory record of business integrity.”

Other cities are using social responsibility as a bargaining chip with its banking partners. Earlier this year both Seattle and Davis, California, pulled billions of dollars of business from Wells Fargo over the bank’s financing of the Dakota Access Pipeline.

On Tuesday, ACCE members and other activists paid a visit to City Council members and staffers to lobby them on the language of the ordinance ahead of a hearing in the budget and finance committee next week. Maria Loya learned that big banks, including Wells Fargo and Bank of America, have also been lobbying hard against strong and specific language in the responsible banking ordinance.

“We’ve been hearing that the banks are telling the City Council that they need sales goals to function like every business,” said Loya. “But we say banks are different than a shoe store or other retailer because their products carry huge debt.”

Wells Fargo and Bank of America were contacted for this story but they declined to comment on responsible banking ordinances.

Loya added that she and other responsible-banking advocates were concerned to learn that the city’s Department of Finance has already posted a banking report on the city’s website without any definition for sound responsible banking. “This is not a good sign,” Loya observed. “It says that the city may be content to keep doing business as usual.”

As of publication time, it was still not clear whether the RBO language would be on the agenda of Monday’s Budget and Finance Committee meeting.


Copyright Capital & Main

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