LA will require disclosures about bank sales incentives
Los Angeles Mayor Eric Garcetti has signed an ordinance requiring banks that want to do business with the city to disclose information about employee sales incentives.
The new requirements are intended to protect consumers and bank workers from the kind of aggressive sales tactics that led to the phony-accounts scandal at Wells Fargo. They will only apply to banks that either do business with the city already or are seeking to do so.
Still, LA’s rules could establish a blueprint for other progressive cities where elected officials want to send a message of disapproval to unpopular bankers. Numerous U.S. cities have enacted so-called responsible banking ordinances in recent years, but Los Angeles is believed to be the first municipality to require banks to make disclosures about their sales incentives.
Banks will be required to say whether they set individual or branch-level sales goals or requirements, and whether they consider the quantity of an employee’s sales as a basis for decisions about advancement, termination or compensation.
Banks will also be asked whether they have policies and training in place to prevent sales abuses.
The California Bankers Association opposed the ordinance, arguing that the city may have a hard time finding banks that are interested in its business, since they will be reluctant to share proprietary information about their sales practices.
Los Angeles has had a Responsible Banking Ordinance since 2012, and the revisions signed by the mayor on Monday grew out of recommendations last year from the Los Angeles Community Review Board on Responsible Banking.
“We’re pleased by the Mayor’s decision to sign an amended Responsible Banking Ordinance that makes Los Angeles a leader in holding our country’s financial industry accountable,” Maria Loya, Los Angeles policy director for the Committee for Better Banks, said in a press release.
“Customers deserve to know the truth about the predatory practices and abusive working conditions at their banks that could hurt their communities.”