Building and Protecting Wealth in Communities

ITEM 4 – TAKE STEPS TO PREVENT PREDATORY LENDING

WHEREAS:

Wells Fargo & Company, through its subsidiary, Wells Fargo Bank, National Association (collectively, “Wells”), provides credit to lenders, which supplies the capital that these lenders need to engage in predatory payday lending, a practice that, we believe, has a negative impact on elderly, minority and low-to-moderate income consumers (collectively, “vulnerable consumers”).  

Payday loans, as generally defined by bank regulators, are small-dollar, short-term loans that borrowers promise to repay out of their next paycheck or deposit of funds.  

Certain payday lenders provide loans that are predatory. These lenders charge unreasonable interest rates and/or high fees for extremely short terms and encourage multiple loan renewals (a practice commonly known as “Loan Flipping”). Such lenders also target vulnerable consumers who are least able to afford the cost of such predatory practices.  

In our opinion, predatory lending, generally, and the practice of Loan Flipping, specifically, puts vulnerable consumers in a “debt trap,” where they have difficulty paying the principal owed due to the accumulation of exorbitant fees and interest.  

For these reasons, predatory payday loans hurt vulnerable consumers and the neighborhoods in which they live.  

Wells provides loans to payday lenders that, we believe, engage in predatory payday lending. We believe that by providing such credit to predatory payday lenders, Wells’ practices increase the economic obstacles facing vulnerable consumers.  

Such lending is contrary to the spirit and provisions of the Community Reinvestment Act of 1977, and the regulations promulgated thereunder, (“CRA”), which obligates Wells to affirmatively meet the credit needs of the communities it serves. Moreover, regulators have warned banks of the significant compliance, legal and reputational risks of payday lending.  

Other major financial institutions such as SunTrust Banks, Inc. (“SunTrust”) have recognized that financing predatory payday lenders is a negative practice and have voluntarily ceased to finance payday lenders.  In a July 12, 2004 letter to the Federal Reserve Bank of Atlanta , SunTrust’s CRA compliance manager stated that after considering the potential reputational risks and consumer harm that could result from lending to such companies, SunTrust  revised its credit policies to prohibit all future loans to businesses that engage in payday lending.  

Wells continues to finance payday lenders that, we believe, engage in predatory lending despite the negative socio-economic impact on vulnerable consumers, negative statements on predatory payday lending from regulators and the voluntary withdrawal from the payday lender financing market by other major financial institutions, such as SunTrust.  

RESOLVED:

Shareholders request that the Board of Directors implement a policy mandating that Wells Fargo will not provide credit or other banking services to lenders that are engaged in payday lending.