Plan to make banks divulge sales goals closer to becoming L.A. law
The Los Angeles City Council has passed an ordinance — the first of its kind in the country, according to supporters — that would require banks seeking to do business with the city to disclose whether they have sales goals or quotas for employees.
The disclosure requirements, which were pushed by the union-backed Committee for Better Banks, are designed to protect both consumers and bank employees from the sort of aggressive sales tactics that embroiled Wells Fargo in scandal.
Supporters are now calling on Mayor Eric Garcetti, a Democrat, to sign the ordinance, which passed the City Council in late June. Though the mayor has not committed to signing the measure, activists were jubilant Tuesday as they rallied on the steps of City Hall.
“I know that humble, honest, hardworking people are targeted and preyed upon by the financial industry,” said Councilwoman Nury Martinez, who sponsored the ordinance. “We cannot govern the banking industry, but we can foster an environment of transparency and accountability.”
Also speaking at the press conference were activists who said that bank employees face pressure to sell products to vulnerable consumers, including immigrants and the elderly.
Kilian Colin, a former Wells Fargo employee in San Diego who is now a volunteer with the Committee for Better Banks, said that the activists’ fight should continue until the use of sales goals in banking is banned.
“This is a historic victory for all of us,” he said. “This is not the end.”
The city of Los Angeles’ action is a response to Wells Fargo’s phony-accounts scandal, which emerged from reporting in 2013 by the Los Angeles Times and a subsequent investigation by the L.A. City Attorney’s Office. A Wells spokesman declined to comment Tuesday.
Sales quotas at Wells Fargo were widely blamed for creating an environment in which employees opened as many as 3.5 million customer accounts without their permission. Since then, Wells has overhauled its formula for compensating retail banking employees.
Under the Los Angeles ordinance, banks that want to sign up the city as a customer would 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 would also be asked whether they have policies and training in place to prevent sales abuses. And they would be required to provide an annual statement about their community reinvestment activities in the nation’s second largest city.
One big question now is whether the new rules will scare off banks from seeking to do business with Los Angeles. The city has $17 million in taxpayer-funded contracts with banks, according to the Committee for Better Banks.
The city of Seattle, which at one point sought to sever ties with Wells Fargo, recently renewed its contract with the San Francisco-based bank after failing to find any other takers.
Beth Mills, a spokeswoman for the California Bankers Association, said that the city of Los Angeles may have a hard time finding banks that are interested in its business, since financial institutions are reluctant to share proprietary information about their sales practices.
“A lot of it kind of ties back to business strategy that they don’t want disclosed for competitive reasons,” Mills said.
Many banks have altered their retail sales practices in the aftermath of the Wells Fargo scandal, though for the most part, the details of those changes have remained under wraps. Earlier this year, the Office of the Comptroller of the Currency finished its review of sales practices at more than 40 large and midsize banks. In all, the agency identified 252 items that it wanted fixed.
The Committee for Better Banks is pointing to aggressive sales tactics as it seeks to organize workers at banks across the country. On Monday, another union-backed group, the National Employment Law Project, released the results of a survey of 400 current and former bank employees. It found that some banks still use sales quotas.
“Workers reveal that in some cases sales quotas are still in effect, if they are somewhat less openly pushed and celebrated than before, and that for many workers base wages are still too low to enable them to care for their families without incentive bonuses,” the report stated.