YOU ARE HERE: LAT HomeCollections

Wells Fargo Is Assailed by Activists Over Its Lending

Bank denies neglecting poor areas or engaging in predatory practices. Protests are set for today.

May 05, 2003|E. Scott Reckard | Times Staff Writer

Wells Fargo & Co., already under fire from California banking regulators for allegedly improper lending practices, today will face protesters throughout the country, organized by an advocacy group that has made life difficult for a number of financial institutions.

The Assn. of Community Organizations for Reform Now has accused the San Francisco bank of, among other things, failing to properly serve lower-income neighborhoods and engaging in predatory lending practices -- contentions the company denies.

In February, ACORN's Minneapolis branch dubbed California's largest financial institution "shark of the year." Today the association plans to take its complaints to the national stage with protests at Wells Fargo offices in a dozen cities, from Sacramento to Philadelphia.

In a critical report, also scheduled for release today, ACORN alleges that Wells has failed to provide the best loans at the best price in poorer neighborhoods. Instead, "problems develop when the terms of the loans -- and the tactics used to sell them -- become abusive, and when they are aggressively marketed to vulnerable borrowers, especially those who could have qualified" for a lower interest rate, the group said.

ACORN said it based its study, in part, on Wells' own mortgage data from 2001.

Wells Fargo Financial Chief Executive Daniel W. Porter acknowledged that his operation, like other sub-prime lenders, has drawn criticism for high interest rates and fees -- charges traditionally defended as necessary to offset risks posed by customers with spotty credit. Matching the terms included in competitors' lawsuit settlements last year, the company cut the maximum it collects in upfront interest charges, known as points, from 10% to 5%.

Porter heatedly took issue with ACORN's allegations of deceptive sales tactics. He said that unlike some unethical competitors, Wells Fargo Financial bends over backward to make sure borrowers know precisely the terms of the loans for which they sign up and will revise them when it receives substantive complaints.

"I'm not going to tell you we don't occasionally make a mistake, but allegations about our sales tactics are total garbage," Porter said. "Our sales practices were fine and we've changed our pricing along with the competition. I don't know what else there is to do."

Wells Fargo is getting the unwanted attention partly because it has become the No. 1 originator of prime mortgages, which offer buyers with solid credit the best combinations of low interest and fees. ACORN says Wells should therefore have the highest potential to help lower-income borrowers. Instead, ACORN alleges, Wells has been guilty of "exactly the kind of abuses" that anti-predatory lending laws try to prevent.

Wells Fargo has suffered through several recent public disputes with California regulators and has been hit by an increase in consumer complaints to federal banking regulators, particularly about its mortgage operations. Four days ago, the California Department of Corporations revoked Wells' state mortgage-lending licenses, saying it had charged borrowers interest earlier than permitted by state law.

At today's demonstrations, ACORN will draw attention to two issues.

The group contends that Wells Fargo Bank and its huge mortgage subsidiary do not have enough branches in lower-income neighborhoods and make too few prime loans in those areas. It also alleges that Wells Fargo Financial -- a separate Wells unit that concentrates on debt-consolidation loans to borrowers with sub-par credit histories -- is practicing so-called predatory lending in these same, often minority neighborhoods.

ACORN asserts that the bank drains homeowner equity by wrapping excessive fees into mortgages, that it is charging 10% or 12% interest to borrowers who qualify for 6% or 7%, that it is leading customers to believe they have fixed-rate loans instead of variable-rate mortgages and that the institution has been hiding the cost of taxes and insurance.

"We've heard consistently from people around the country that they weren't aware of various costs and that the loans were more expensive than they had been told," said Chris Saffert, deputy director of ACORN's financial-justice center.

These allegations stand in marked contrast to the praise heaped on Wells by community groups in the 1990s for its large financial commitments to lending in low-income areas and its proud promotion of the fact that it makes more home loans in such areas than any other financial institution.

ACORN, founded in Little Rock, Ark., in 1970 as an advocacy group for welfare recipients, has chapters in 51 cities. The group has been instrumental in passing local laws to rein in abusive lending, including statutes in Los Angeles and Oakland.

The group also has had an effect on big national lenders, including Ameriquest Mortgage Co. and Household International Inc.

Los Angeles Times Articles