A Los Angeles City Council committee is scheduled Monday to examine a plan to tighten up rules on banks that want to do business with the city as a response to the Wells Fargo fake accounts scandal.
The City Council approved a motion in November that would amend the city’s Responsible Banking Investment Monitoring Ordinance to require that banks doing business with the city adhere to responsible banking practices, including not setting “predatory sales goals.”
The Responsible Banking Ordinance was created in 2012 and requires banks doing business with the city to disclose information on loans and foreclosure activity.
A draft version of the ordinance amendment presented in May by the office of City Attorney Mike Feuer and set to be discussed by the Budget and Finance Committee includes a number of changes but does not specifically include any banning of sales quotas or any mention of sales practices.
A coalition of advocates called the Los Angeles Community Review Board on Responsible Banking has been pushing for the more stringent language banning predatory sales goals to be reinserted into the ordinance. The group released a report in September outlining its recommendations.
“Los Angeles faces an unprecedented opportunity to formally write responsible banking into the fabric of the city’s code of contracting,” said Jennifer Epps-Addison, president and co-executive director of the Center for Popular Democracy, in September. “But unless the city’s leaders move to amend the Responsible Banking Ordinance and enact the principles outlined in this report, the financial health of Los Angeles will continue to suffer.”
The draft ordinance does require banks to disclose their Community Reinvestment Act score, which tracks a bank’s level of lending, investments and services in low- and moderate-income neighborhoods. Wells Fargo’s score took a significant hit due to the fake accounts scandal.
The draft ordinance also requires a bank to disclose any recent regulatory action taken against it, that it have whistle blower protections, and that it certify that it is currently in compliance with all applicable consumer financial protection laws.
In June, the City Council passed a motion directing the Office of Finance to report on the impacts of suspending activity with Wells Fargo until it improves its CRA score to satisfactory, and for the City Attorney’s Office to report on the possibility of discontinuing its business with Wells Fargo based on its CRA score.
“It’s time for us to endeavor to only do business with ethical financial institutions that have high standards and ethical standards. This is a very fiscally sound approach to looking at what divestment will mean, and it’s a very complicated and intricate matter,” said Councilman Mitch O’Farrell when he introduced the motion with Councilman Paul Koretz.
The city settled a lawsuit with Wells Fargo last year after some of the bank’s employees created more than 3.4 million unauthorized accounts as a way to meet aggressive sales goals set by management. The bank paid $50 million in civil penalties to the city of Los Angeles and $135 million to two federal agencies, and was ordered to provide restitution to affected customers.
The city currently does the majority of its banking with Wells Fargo through roughly 800 different accounts.
—City News Service
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