Consumer Group Joins Opposition to Wells Mergers

Consumer group Inner City Press has challenged Wells Fargo & Co.’s planned takeover of Pacific Northwest Bank in Seattle and Bank of Grand Junction in Colorado, telling regulators that the San Francisco financial company exploits poor and minority customers in this country and overseas.

In letters to the Federal Reserve and state regulators, New York-based Inner City Press joined the Assn. of Community Organizations for Reform Now, which also has asked regulators to withhold approval of the Wells acquisitions and investigate its lending.

In a series of rallies at Wells Fargo offices, ACORN has accused California’s largest financial institution of pushing high-cost loans from its consumer- finance unit in low-income neighborhoods instead of providing bank loans on better terms.

The community groups also accuse the finance subsidiary, which caters to so-called subprime borrowers with credit problems, of abusive and deceptive lending practices -- charges the unit’s executives have vigorously disputed.

Moreover, Inner City Press maintained, Wells Fargo is “exporting these practices” to the Caribbean through Island Finance, a Puerto Rican consumer-finance lender it owns. Inner City Press has made similar allegations about New York’s Citigroup Inc. and its Citifinancial subsidiary, and London-based HSBC Holdings, a major banking concern that bought U.S. consumer-finance giant Household International Inc. this year.

“We’ve noticed that what these lenders really want to do is export their questionable subprime lending practices all over the world,” said Matthew Lee, executive director of Inner City Press and its Fair Finance Watch.

Defending Wells’ lending, a spokesman noted that federal bank examiners have given the bank “outstanding” ratings for community lending since 1998, when Minneapolis-based Norwest Corp. acquired San Francisco-based Wells, name and all. The spokesman said the challenges were not expected to delay Wells’ acquisitions of the Colorado and Washington banks this quarter. The deals must be approved by shareholders and regulators.

A spokeswoman for HSBC declined to comment. Citigroup spokesman Steve Silverman said the company was proud of having “very good” lending practices throughout the world and of how it has improved standards at the largest U.S. subprime lender, Associates First Capital Corp., which it acquired and wrapped into Citifinancial in 2000.

Community groups often use proposed acquisitions as an opportunity to pressure federal and state regulators to examine banks’ lending practices, since the banks are required by federal law to make loans anywhere they take deposits.

In a decision announced July 23, the Washington state Department of Financial Institutions said it had reviewed Wells’ proposed takeover of Pacific Northwest for about $600 million in stock, concluding that based on available information it “cannot disapprove this merger application.”

But the department expressed “serious concerns” about persistent reports of “predatory” lending at Wells’ subprime subsidiary, Wells Fargo Financial, which operates independently of the bank. Saying the Federal Reserve is “best positioned” to investigate the matter, the department’s director, Helen P. Howell, urged the Fed to “take these claims seriously and look at WFC more carefully.”

Fed spokeswoman Susan Stawick said the central bank had no one available to talk about the issues Tuesday.