Press Release June 8, 1998	Contact: Gail Hillebrand or Earl Lui, (415) 431-6747 Consumers Union West Coast Regional Office

CONSUMERS UNION STATEMENT ON
WELLS FARGO,NORWEST MERGER

Group Urges Banks to Avoid Worst Practices of Wells Fargo,
Make Specific Commitments to California Consumers

SAN FRANCISCO, CA – The following statement is attributable to Gail Hillebrand, senior attorney and head of the credit and finance team at the West Coast Regional Office of Consumers Union, nonprofit publisher of Consumer Reports.

If this merger is approved, Consumers Union encourages new management in the proposed merger to avoid Wells Fargo’s anti-consumer practices of recent years. We also urge Wells Fargo and Norwest to make specific consumer benefit commitments in their application for merger approval, rather than general promises in public statements and press releases.

This specific merger proposal offers an opportunity for the banks to prove customer commitment by moving away from some of Wells Fargo’s worst practices. For example, Wells Fargo pioneered the pay-day loan for banks, which charges about $1 per $20 borrowed for very short periods. This totals an astounding 260 percent annual percentage rate (APR) for a seven-day loan. Wells Fargo also initiated a fee for customers who talk with a live customer service representative more than a few times a month. Wells Fargo was also the first major bank in California to fingerprint non-customers seeking to cash checks at their bank. And in 1997, Wells Fargo closed hundreds of branches, following its 1996 merger with First Interstate.

We hope any new company formed from the proposed merger would disavow Wells Fargo’s unfortunate trailblazing in such anti-consumer practices.

Studies by the Federal Reserve Board and others show that large banks charge higher fees for many types of accounts than smaller banks, and that out-of-state banks charge higher fees than in-state banks. At the same time, merging banks insist that "bigger is better." Consumers Union urges all merging banks, including Wells Fargo and Norwest, to make specific commitments to consumers and communities to help ensure that big banks don’t leave small customers behind.

To that end, Consumers Union recently sent a letter Federal Reserve Chairman Alan Greenspan, requesting that merging banks provide guarantees for consumers and communities. These commitments should be made part of the merger application so that they can be enforced by federal banking regulators if they are broken. In summary, these guarantees include the following:

• Commit to a moratorium on fee increases, new fees, and minimum balance requirements.
  
• Dedicate a significant portion of the projected benefits from cost-savings from each merger for the first five years after the merger to increase access to banking services and credit for low-income consumers.
  
• Commit to reach an agreement with community groups and Community Reinvestment Act coalitions in every affected state and to reach agreement with each of those groups on future CRA commitments before regulatory approval of the merger.
  
• Out-of-state entities must commit to comply with all state consumer laws, rules, regulations of the states in which they do business.
  
• Adopt strong consumer safeguards on retail sales activities and agree to be responsible for losses arising from violations of these safeguards.
  

[Editors: Call 415/431-6747 for a copy of the April letter from Consumers Union to Federal Reserve Chairman Alan Greenspan outlining consumer concerns in bank mergers.]

[ Health ] [ Finance ] [ Food ] [ Product ] [ Other ]
[ About CU ] [ News ] [ Tips ]
[ Home ]


Please contact us at: http://www.consunion.org/contact.htm
All information ©1998 Consumers Union