SALT LAKE CITY — Some irate consumers took to the streets of downtown Salt Lake City to protest what they called discriminatory lending practices and unethical investments of one of the nation’s largest financial institutions.
A group of about 40 people demonstrated in front of the Grand America Hotel Tuesday to express their disapproval of Wells Fargo business practices they claim unfairly target minorities and low-income consumers.
Chanting “What do we want? Justice! When do we want it? Now!” the group gathered in front of the hotel where inside Wells Fargo CEO John Stumpf was leading the company’s annual shareholders meeting — held in Salt Lake City for the first time.
At the meeting, a shareholder resolution was introduced that called on Wells Fargo to conduct a full independent review of its mortgage and foreclosure practices to ensure legal compliance. Critics argued that the company may be violating lending laws and negatively impacting families nationwide.
“The experience on the ground is that Wells Fargo is doing a horrible job and causing serious problems for people and for communities,” said Josh Zinner, co-director of the New York city-based Neighborhood Economic Development Advocacy Project, which introduced the proposal. “They are losing documents, causing long delays in the process, giving people the run around, and going ahead with foreclosures when they are suppose to be working on loan modifications.”
In response, the company said it was working to address the concerns raised by its shareholders and customers.
“We are absolutely committed to trying to do what we can to help as many folks as possible,” said Oscar Suris, Wells Fargo executive vice president of corporate communications. “All we can do is do our level best and work with communities as best as we can to resolve these (issues).”
Among the major concerns raised during the meeting was Wells Fargo’s Direct Deposit Advance service, which critics compared to high-interest payday loan services.
Since 1994, the bank has offered a product for customers enrolled in direct deposit. With this credit service, customers may be eligible to advance up to $500 before their next electronically deposited paycheck or qualified direct deposit. The funds borrowed are automatically deposited into the customer’s checking account with the funds accessible as long as the account has a positive balance.
One of the more controversial facets of the Wells Fargo loan was how the bank collects payments. The bank will automatically deduct the debt from any direct-deposited paycheck or from any direct deposit over $200.
“To charge someone triple-digit interest rate, even though it’s half of what (traditional payday lenders) charge doesn’t mean that it’s a good product or a fair product,” said Linda Hilton with Crossroads Urban Center — a Salt Lake City-based advocacy organization. “It is still predatory and it still puts people into a debt trap.”
She said such products often force low-income earners into a cycle where they find it very difficult to pay their monthly expenses and end up paying far more in interest than they actually borrowed.
Longtime Wells Fargo customer Annette Smith of Rockland, Calif. traveled to Utah to confront CEO Stumpf about her issues with Direct Deposit Advance. About five years ago, she used the Direct Deposit Advance service to borrow $500 to pay for her car’s registration fees. Since taking out the loan, she said she has been unable to pay it off. After making her situation known during the meeting, Wells Fargo representatives are working with her to resolve her issue.
It is important to note this service is an expensive form of credit designed for short-term borrowing needs, warned Wells Fargo spokeswoman Richele Messick.
“It isn’t for everyone,” she said.
The product may be helpful if you are experiencing a financial emergency and need money on a short-term basis, she said. The fee is less than half of what payday lenders typically charge, and she also noted that Wells Fargo has restrictions in place to prevent customers from using the product as a long-term lending solution and accumulating high interest fees.
“We do believe it’s a less expensive alternative to a payday loan,” Messick said.
Protesters also called on Wells Fargo to end practices that profit from community losses, including foreclosure, payday-type lending and investment in private prisons.
Some implored the bank to modify their lending practices and offer borrowers a path to debt reduction.
The U.S. Department of Justice recently sued Wells Fargo for discriminatory lending practices, and following a judgment in 2012, the bank agreed to compensate African-American and Latino borrowers who were steered into sub-prime loans based on their race, according to the Alliance of Californians for Community Empowerment — a community advocacy group based in Los Angeles.
“We recognize that there are a lot of predatory loan practices and racial loan practices,” said ACCE spokesman Melvin Willis. “They are making record profits while people are just struggling to have the 'American dream' — to live in a house and raise a family.”
He said foreclosures are still harming families, particularly in minority communities nationwide.
“That is unacceptable and that is why we are here today,” Willis said.