Cities should stop banking with predatory banks that rip off their communities

wellsfargoElected leaders to city government would have good reason to stop giving certain banks their business: those banks are exploiting their own constituents.

In yet another banking scandal illustrating the point, Wells Fargo recently announced that it was caught fraudulently creating millions of bank accounts without their customers’ knowledge and charging fines on those phony accounts. Although the bank fired thousands of employees who had been pressured to meet sales goals, it’s still refusing to officially admit to wrongdoing; plus it’s still paying out $125 million to the executive who oversaw those wayward workers. So to many familiar with the banking industry, it’s a classic case of Wall Street making a buck ripping off Main Street and then passing blame.

In fact, this Wells Fargo scandal comes on the heels of an investigation into predatory banking practices published earlier this year. As it explains, at the foundation of the problem is the incentive structure set by banking executives—which force frontline workers to choose between their jobs and consumers:

Eight years after the financial crash, Wall Street CEOs and shareholders are filling their personal bank accounts with earnings from immoral and exploitive bank sales quota systems,” said Anastasia Christman, Deputy Program Director at NELP and author of the report. “Big banks are using frontline workers to pull the wool over ordinary consumers’ eyes. Americans trust bank tellers, but these individuals face the impossible choice of pushing high interest credit cards and other predatory ‘products’ just to keep their jobs.”

The report, Banking on the Hard Sell, finds that in the past six years, consumer complaints to the Consumer Financial Protection Bureau concerning retail banking have risen—in the past year alone complaints increased by 34 percent. Banks continue to reap the rewards from predatory retail tactics: Wells Fargo derived over a quarter of its revenue from predatory fees last year, and the average bank CEO takes home around 455 times the average American worker’s salary. The report finds that low-paid bank workers are ultimately the ones who must directly grapple with the reckless demands of these executives, as predatory incentive programs force them to choose between the consumer’s best interests and earning a living wage.

As experts on ethical banking are explaining in response, a key strategy to counter the banking industry’s penchant for predatory practices is to simply make it bad for business. Here’s an example by the Committee for Better Banks petitioning Los Angeles city officials:

We ask Mayor Eric Garcetti and the Los Angeles City Council to support a policy that would prohibit the City of Los Angeles from doing business with banks that force their workers to meet predatory sales goals by pushing new accounts, loans, credit cards and debt cards of our residents.

Advocates and government officials in other cities should take note. For more information, see “Banking On The Hard Sell: Low Wages And Aggressive Sales Metrics Put Bank Workers And Customers At Risk,” National Employment Law Project (NELP) (2016); “When Bank Workers Occupy the Banks,” The Nation (2015).