ResponsibleWealth.org - 2004 Shareholder Resolution: Wells Fargo

This Year's Campaign | Previous Campaigns | Q & A

Status

% voting YES: 5.9%

Shareholder resolutions face a variety of obstacles. For this reason, it is considered significant if a resolution garners at least 5% of the vote. Votes over 10% indicate exceptional shareholder support for an issue.

Filers of "social-issue" resolutions generally don't expect their resolution to receive a majority vote and be adopted by management. Rather, filers use these resolutions to get management's attention, and to raise the issue with other shareholders. They hope to achieve a vote sufficient to allow them to return the next year.

According to SEC rules, a resolution must receive 3% of the vote the first year it is filed, 6% in year two and 10% thereafter in order to be included on the proxy the following year.

Wells Fargo

Predatory Lending

Whereas,

Wells Fargo is one of America’s largest sub-prime lenders, making real estate and consumer finance loans to borrowers with less than perfect credit.

Historically, sub-prime lending has 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. Within the last two years, Citigroup paid $200 million and Household International paid $484 million to settle predatory lending complaints.

Wells Fargo, a relative newcomer to the sub-prime lending industry, has already run afoul of state regulators. In 2003, California regulators fined Wells Fargo $38 million for failing to meet state disclosure standards when mailing draft loans (also known as “live checks”) to prospective borrowers. After Wells Fargo represented that it had corrected the disclosure problem, regulators found evidence of continued violation and brought additional “willful disregard” charges against our company.

In a separate incident, Washington’s top banking regulator approved Wells Fargo’s merger with Pacific Northwest Bancorp in July, 2003, but warned: “public allegations of predatory lending practices 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 lags other major industry players in developing policies protecting borrowers and shareholders from predatory lending abuses:

Unlike other lenders, Wells Fargo has no clear and public commitment that customers will not be discriminated against or charged higher prices on the basis of which part of the company they do business with.

Wells Fargo has not established policies requiring that all mortgage refinancings provide net benefits to borrowers, as is the current industry best practice.

Wells Fargo has not adjusted compensation policies to discourage abusive sales practices, nor has the company established comprehensive audit procedures to ensure compliance with fair lending laws and company policies.

Wells Fargo continues to charge pre-payment penalties as long as five years, while the best practice within the industry is two years. Pre-payment penalties make it more difficult for borrowers to save money by refinancing.

Resolved,

Shareholders request that the Board conduct a special executive compensation review to study ways of linking executive compensation to successfully addressing predatory lending practices. Among the factors to be considered in this review are: implementation of policies to prevent predatory lending; evaluation of sub-prime loans by outside auditors for compliance with laws and company policies; constructive meetings with concerned community groups; and reductions in predatory lending complaints filed with government bodies. A summary of this review, prepared at reasonable cost and omitting proprietary information, shall be made available to shareholders, upon request, no later than October 1, 2004.

Top of Page