Earlier this year, reports began to emerge that New York City was considering becoming the next in a string of cities and states that cut ties with Wells Fargo in the wake of the bank’s fake account scandal.
And Wednesday, that’s exactly what happened, as New York City’s mayor and comptroller announced that the city is ending its business relationship with Wells Fargo.
According to the office of New York City Mayor Bill de Blasio, the city is suspending its relationship with Wells Fargo due to the bank’s failure to meet its requirements under the Community Reinvestment Act.
Back in March, the Office of the Comptroller of the Currency released Wells Fargo’s latest Community Reinvestment Act evaluation, which reduced the bank’s overall CRA rating two notches, from “Outstanding” to “Needs to Improve.”
At the time, the OCC said that is due to “the extent and egregious nature of the evidence of discriminatory and illegal credit practices,” among other things.
Per the OCC report, Wells Fargo demonstrated an “extensive and pervasive pattern and practice of violations across multiple lines of business within the bank,” which resulted in “significant harm to large numbers of consumers.”
Included among that pattern of violations was the $150 million fine levied against Wells Fargo last year by the Consumer Financial Protection Bureau, the OCC, and the city and county of Los Angeles for more than 5,000 of the bank’s former employees opening more than 2 million fake accounts in order to get sales bonuses.
And according to de Blasio’s office, Wells Fargo’s Community Reinvestment Act downgrade is the driver for the city ending its relationship with the bank.
“The rules are very clear: if you fall below ‘satisfactory,’ we will no longer do banking business with you,” de Blasio said in a statement.
“I encourage Wells Fargo to quickly clean up its act and do right by the millions of customers who trust the bank with their savings,” de Blasio added. “Until then, we will not be entering new contracts with the bank. Thank you to Comptroller Stringer for his partnership on this issue.”
Specifically, de Blasio’s office stated that the mayor and city Comptroller Scott Stringer will vote Wednesday to prohibit New York City from entering into new contracts for deposits with Wells Fargo, and suspend the bank’s role as a senior book-running manager for NYC General Obligation and Transactional Finance Authority bond sales.
According to information from de Blasio’s office, Wells Fargo currently holds contracts with New York City to provide banking services, including operating “Lock Box” services that hold taxes and fees collected by the city.
Currently, there is approximately $227 million of NYC dollars held in Wells Fargo accounts. Wells Fargo also acts as a trustee to the New York City Retiree Health Benefits Trust, which has current assets of approximately $2.6 billion.
But due to the CRA downgrade, the mayor and comptroller will vote to prevent city agencies from entering into new banking services or related contracts with Wells Fargo, and bar agencies from renewing or extending existing contracts.
The city will also suspend the use of Wells Fargo as a senior book-running manager for municipal bonds for one year, de Blasio’s office said. The only allowable exemption will be for affordable housing financing, which has a “direct benefit” to New York City residents, de Blasio’s office added.
According to the mayor’s office, the ban will revisited “only” when the bank’s CRA rating is raised.
“What happened at Wells Fargo was a fraud – and there should be consequences,” Stringer said.
“We need to send a message to this bank and the broader industry that ethics matter. Public trust is a must – and accountability is non-negotiable. That’s why we plan to take action,” Stringer added. “We have an opportunity to stand up and do the right thing today, and that’s a moment we plan on seizing. I would like to thank Mayor de Blasio and his team for their leadership on the issue.”