Iowa CCI: Wells Fargo major provider of payday lending funds
Tuesday, August 25, 2009 11:23 AM
Wells Fargo & Co. has loaned hundreds of millions of dollars to payday lenders throughout the country, according to documents that Iowa Citizens for Community Improvement (CCI) submitted to Federal Reserve officials at a community meeting last Saturday in Des Moines. The loans, made to at least eight national payday lending chains over the past several years, were made despite assertions by Wells Fargo officials that the company "condemns the use of deceptive, predatory or abusive lending practices by anyone in the marketplace."
"Wells Fargo may not be the good corporate citizen it claims to be," Hugh Espy, executive director of Iowa CCI, said in a press release, saying the organization has demanded that the Fed "tell Wells Fargo to stop financing payday lenders."
Payday loans are loans with 400 percent or higher interest rates that must be repaid within two weeks. Iowa CCI members say the products trap many customers in a cycle of debt that can be impossible to escape.
According to documents filed with federal and state regulators, Wells Fargo and its subsidiaries have provided revolving lines of credit of as much as $300 million to payday lending companies. Included in that figure is a $200 million line of credit to Ace Cash Express Inc. through the end of 2010, which can be increased by as much as $25 million, as well as a $75 million seasonal revolving credit line for use during the year-end holiday and tax seasons.
Wells Fargo has received assurances from these payday lenders that they are complying with fair-lending practices, said Angela Kaipust, a spokeswoman for Wells Fargo Bank.
"With a national customer base, we have relationships with a small number of payday lenders and check-cashing companies," Kaipust said. "It's a very small percentage of our total commercial lending portfolio. Our loan documents include representations of their compliance as well as continued compliance with all applicable laws and fair, responsible lending practices."
Iowa CCI officials said they have received a commitment from Alicia Williams, vice president of consumer and community affairs for the Federal Reserve Bank of Chicago, to convene a meeting in Des Moines by year's end with local bankers and Iowa CCI members to discuss predatory payday lending. Iowa CCI is advocating the use of a small-dollar loan program it has established in partnership with Bankers Trust Co. to provide an alternative to payday loans. The program offers loans of up to $1,500 with a 12 percent interest rate and a payback period of up to three years.
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