Faith-based Investors Celebrate Victory in Wells Fargo Pay Day Lending Decision
January 17th, 2014
Wells Fargo, a major US bank targeted by faith-based investors for their harmful pay day lending practices, announced today that they would discontinue their Direct Deposit Advance service. This is a huge victory on behalf of those who have fallen prey to this predatory lending.
In a Shareholder Resolution with Wells Fargo, which the Oblates co-filed in 2012 and 2013, and in dialogs with company officials, ICCR members raised serious concerns about these loans, their impact on people, and the risks to the bank by engaging in such practices.
ICCR issued a press release on the bank’s decision:
After a long-term engagement with Wells Fargo to promote more responsible lending products, today members of the Interfaith Center on Corporate Responsibility (ICCR) wish to commend management for making the right decision in ending its Direct Deposit Advance program. The company issued a statementtoday announcing that it would discontinue the product effective February 1st.
The Direct Deposit Advance program targeted cash-strapped customers in need of quick credit solutions, but similar to payday loans, Wells Fargo’s Direct Deposit Advance carried hefty fees. As advances and fees are repaid automatically, in full, when the customer’s account next receives a direct deposit, these loans carry a great risk of trapping borrowers in cycles of long-term debt.
ICCR members have been in dialogue with Wells Fargo since 2009 urging the bank to provide affordable and sustainable credit products for financially insecure customers. As a result of this engagement, the company adopted anti-predatory lending guidelines for its subprime mortgage business. But Wells Fargo continued to offer the cash advance product and was one of only a few major banks to do so.
Said Sr. Nora Nash of the Sisters of St. Francis of Philadelphia, “Since 2009 the Sisters of St. Francis of Philadelphia have worked extensively with Wells Fargo on credit card/lending programs and practices because it is our local bank. The need for regulatory action in credit cards and lending programs was obviously lacking, and members of ICCR and other shareholders were concerned that customers were being trapped by excessive charges. In 2010, the Consumer Credit Card Act was finally passed and more stringent credit card regulations became effective. Not being satisfied that Wells Fargo and others banks were doing their share to protect vulnerable customers, we have dialogued and filed resolutions on the Direct Deposit Advance program with Wells Fargo for the past three years.”
Said Dan Nielsen of Christian Brothers Investment Services who filed this year’s shareholder resolution with the bank, “We commend Wells Fargo’s decision to discontinue its Direct Deposit Advance product, which we considered to not be in the best interest of its customers’ financial well-being. This move reflects a positive step by Wells Fargo and demonstrates the company’s responsiveness to investors and other stakeholders on this important issue.”
The Wells Fargo announcement comes on the same day that US Bank declared that it would be “winding down” its Checking Account Advance program. Regions Bank recently pulled a similar program. “An end to payday-lending by three major banks is truly something to celebrate,” said Rachel Anderson of the Center for Responsible Lending. “This is an important step toward a fair financial marketplace for American households.”
Fifth Third Bank is now the only major bank still offering the product.
Concluded Nash,“We are delighted that Wells Fargo has finally indicated that this program will be discontinued. We congratulate Wells Fargo for taking this step to protect its customers from the debt trap of this particular financial product. We trust that Wells Fargo will continue to use “Hands on Banking” and other tools to educate all its customers on sound banking products that promote a sustainable financial future.”
For more information, contact: Susana McDermott, Director of Communications, ICCR; firstname.lastname@example.org; 212-870-2938
About the Interfaith Center on Corporate Responsibility (ICCR):
Currently celebrating its 43rd year, ICCR is the pioneer coalition of active shareholders who view the management of their investments as a catalyst for change. Its 300 member organizations with over $100 billion in AUM have an enduring record of corporate engagement that has demonstrated influence on policies promoting justice and sustainability in the world. www.iccr.org