Wells Fargo faces fraud, predatory lending charges, other controversies
The University of California (UC) will retract a $300 million line of credit and a $150 million interest reset contract with Wells Fargo by April of this year. $200 million has already been retracted, and the remaining $100 million will be divested after a replacement bank is found. This follows the termination of the $25 million commercial paper contract with Wells Fargo by the UC in November of 2016.
In September of 2016, the Consumer Financial Protection Bureau (CFPB) fined Wells Fargo $100 million for secretly opening unauthorized banking accounts for existing customers. Federal investigators discovered that Wells Fargo employees had created two million fraudulent bank and credit accounts under the names of existing customers since 2011, prompting the California state treasury to suspend its Wells Fargo investment. The national bank was fined $185 million for these violations.
Wells Fargo is currently part of a banking conglomerate that provides a $900 million line of revolving credit to The GEO Group, the private prison and immigration detention company, and a $135 million line of credit to the private prison group CoreCivic. In August of 2016, the U.S. Department of Justice confirmed its intention to withdraw from privately-operated prison contracts.
Last year, the Afrikan Black Coalition (ABC) successfully pushed the UC to divest $30 million from private prison companies.
Wells Fargo has also faced accusations, lawsuits and settlements regarding racially discriminatory and predatory lending to African Americans and Latinos — it settled with the Justice Department for $184.3 million in 2012.
Recently, Wells Fargo received negative press for helping fund the North Dakota Access Pipeline. Wells Fargo is one of several large banks providing loans and support for the construction of the Dakota Access Pipeline.
Francisco Ferreyra, a third-year community and regional development major at UC Davis and the environmental sustainability officer of the UC Student Association, said that Davis residents and several student groups asked the Davis City Council to also take action against the Dakota Access Pipeline.
“We came to the city council and we asked them to stand in solidarity with Standing Rock and oppose the Dakota Access Pipeline,” Ferreyra said. “These oppressive forces of the fossil fuel industry, the finance industry, they don’t care about you or I. They care about two things: their profits and their reputations. The strategy for us on the ground is to hit them where it hurts, in those two spots. Divestment is a historically successful tactic.”
On Feb. 7, the City of Davis also ended its contract with Wells Fargo. It will be moving $124 million in banking services to another institution by the end of this year. Davis marks the second city embarking on this process, after Seattle finalized its divestment of $3 billion from Wells Fargo on the same day.
“Over the years, a couple of councils ago before I was on, there has been a desire to move more of our banking services to local or regional banks as opposed to large national banks that may or may not have real tight links to our community,” Mayor Robb Davis said.
Davis believes that these unethical practices do not constitute socially responsible banking — they are another factor in the council’s decision to divest.
Claire Doan, a member of UC media relations, explained the university’s rationale for severing ties with Wells Fargo.
“UC believes unwinding some of our credit relationships and suspending our investment banking relationships in tandem with the state treasurer were appropriate actions taken in light of the unauthorized bank and credit card accounts opened by Wells Fargo,” Doan wrote via email. “However, we value our long-standing relationship with the bank, and moving forward we want to continue to engage with new leadership as they reform their business practices.”
Connor Gorman, a UC student workers’ union organizer within the local Davis chapter, said that the ABC was “the school’s driving force” in a push to divest from Wells Fargo.
The ABC announced the divestment on its website and celebrated the victory.
“By taking a stand against the amoral practices of an enormous corporation like Wells Fargo, the Afrikan Black Coalition is pushing the UC to exhibit the kind of leadership necessary for the survival of communities unfairly targeted by a criminal financial system,” a post on the ABC website read. “We dedicate this small victory to the hundreds and thousands of our people who are trapped in America’s gulags. Through the organized struggle of our masses, we believe our liberation is inevitable.”
Ruben Pulido, the vice president and communications manager of corporate communications for Wells Fargo, wrote over email that the bank will continue to support the UC despite the divestment. Pulido said that Wells Fargo does not deny lines of credit with private prisons.
“Since the 1970’s, Wells Fargo has proudly supported the University of California’s mission to be a world-class public research university system,” Pulido said. “And we stand ready to provide that vital support in the future. While we respect the seriousness of our country’s ongoing debate about the criminal justice system, we do not as a corporation take positions on public policy issues that do not directly affect our company’s ability to serve customers and support our team members. Due to chronic prison overcrowding, federal and state governments have for the past 30 years been contracting out detention services. People who want to change that should address their concerns with the appropriate government officials.”
Pulido added that the bank wields no influence in private prison policies and conduct.
“Wells Fargo is a bank,” Pulido said. “We do not set U.S. detention system policy; we have nothing to do with the setting or enforcement of laws; we don’t tell judges where to place people accused of or found guilty of violating the law; and we don’t tell the federal and state governments which companies should be awarded contracts. Wells Fargo holds no shares of either The GEO Group or CoreCivic. We have no seat on either company’s board of directors, and we do not dictate their policies or business models.”
Written by: Aaron Liss and Raul Castellanos — email@example.com