With a 3-2 vote Monday night, West Hollywood’s City Council agreed to end its banking relationship with Wells Fargo, a bank that has been embroiled in controversy for the past three years. Instead, the city will now contract with Bank of the West for its banking services.
The move came despite a city staff report ranking Wells Fargo as the overall top choice for the handling the city’s money. That report also ranked Wells Fargo top for social responsibility and least expensive for handling the city’s accounts.
However, a majority of the Council members felt they could not continue with Wells Fargo due to the scandals.
“Wells Fargo’s primary responsibility is to provide trustworthy banking to people and unfortunately, in this moment, that isn’t what they have been providing,” commented Councilmember Lindsey Horvath.
Councilmember Lauren Meister concurred, saying, “Every week or every other week, there’s just something else that comes out [about Wells Fargo]. I think that we really have to move away from Wells Fargo.”
Wells Fargo has handled the city’s banking since March 2014, but has been enmeshed in controversy since 2016 when news broke the bank pressured employees to open fake bank accounts in the names of customers who had to pay a fee for those accounts.
Since then, Wells Fargo has paid out more than $148 million to settle a class-action lawsuit accusing it of setting up those fake accounts. The bank recently announced that it also has reached a tentative settlement in which it will pay $415 million over a lawsuit alleging that it improperly required customers to acquire auto insurance from which it profited.
Wells Fargo still faces more than a dozen investigations and 14 consent orders with regulatory agencies, including a cap on its growth mandated by the Federal Reserve Bank. The latest scandal is the revelation that the bank charged its customers inappropriate debit card fees.
The city’s contract with Wells Fargo ended in March 2019, but since then, the city has continued with the bank on a month-by-month basis, awaiting a Council decision.
Last year, anticipating that it would leave Wells Fargo due to the scandals, the city sent out a request for proposals for banks that were interested in handling the city’s accounts. Only four banks responded, including Wells Fargo. Based on criteria established by the Council, Wells Fargo ranked highest.
However, when the Council discussed its banking contract in August 2018, it was unhappy with Wells Fargo’s top ranking. Consequently, the Council demanded a revised report using slightly different criteria. That revised report still ranked Wells Fargo at the top with 79.2 points (out of a possible 95). The other three banks were Union Bank with 68.2 points, US Bank with 67.2 points and Bank of the West also with 67.2 points.
Bank of the West scored second place for a “social responsibility ranking” and second lowest in cost of banking services, behind Wells Fargo in both instances.
Horvath commended Bank of the West for moving away from controversial investments like fossil fuels, noting the bank exited its investment in the Dakota Pipeline.
In 2017, the city adopted a “socially conscious banking policy” requiring the banks with which the city contracts should NOT have investments in fossil fuels or nuclear power, weapons production or military systems, tobacco products or privately run prisons.
Horvath also praised Bank of the West for making local investments and for having values that closely align with the City of West Hollywood.
“Bank of the West’s greatest controversy is doing things that are progressive,” said Horvath.
Bank of the West does not have a West Hollywood branch. The nearest branch is at 9401 Wilshire Blvd. in Beverly Hills, followed by branches in Culver City and downtown Los Angeles. However, Meister pointed out that the vast majority of the city’s banking is handled online, so a West Hollywood branch is not mandatory.
In response to questions posed by the city, Bank of the West indicated it would move to install ATMs within the city and ultimately establish a branch within city limits if awarded the contract.
Councilmembers John Duran and John Heilman voted against the switch, believing the city should stick with Wells Fargo.
Heilman felt the city should stay with the bank that got the top ranking, despite the fact no one expected Wells Fargo would be the one which go that ranking.
“If we set forth a process and we agree on the criteria and that criteria is fairly applied, I think we’re not serving the community correctly when, after the fact, we change because we don’t like the result,” said Heilman.
Duran noted that it would be cheaper to stay with Wells Fargo and that basing a decision like this purely on social responsibility was wrong.
“We are trying to force an outcome based on how we feel rather than what’s best for the city,” said Duran.
Although he did not mention it on Monday night, in the past Duran has praised Wells Fargo’s support of the LGBT community. That financial support included the Gay Men’s Chorus of Los Angeles, where Duran served as board chair until March 2019 when he was forced to resign amidst a scandal.
The three people speaking during the public comment period all favored ending the contract with Wells Fargo, including resident Steve Martin who it send the wrong message for the city to bank with Wells Fargo. “There’s just so much baggage tied with Wells Fargo,” Martin said.
Along with the vote to make Bank of the West the city’s bank, the Council also voted to use Union Bank as for any follow-up services the city may need.