Wells Fargo case shows need for credit unions
The recent settlement between Wells Fargo and the city of Los Angeles, which sued the bank giant for unethical conduct, is another testament to the importance of a not-for-profit, member-owned alternative in the financial services marketplace. Thank goodness credit unions exist to provide that cooperative alternative for more than 1 million members in Iowa.
In addition to the record $185 million fine imposed on Wells Fargo by the Consumer Financial Protection Bureau, the bank also will have to pay another $5 million in “customer remediation” as a result of opening more than 2 million unauthorized deposit and credit card accounts and collecting more than $2 million in unearned fees. While it is good to see Wells Fargo taking responsibility for its inappropriate actions, the situation underscores an unethical corporate culture, driven by profits and greed, which fosters corrupt behavior.
The need for member-owned, not-for-profit credit unions never has been clearer. The cooperative ownership structure enables credit unions to return earnings back to their members in the form of lower fees and better rates. In our great state, Iowa credit union members save about $100 million annually compared to what they would have paid for similar services at a bank. Credit unions also continue to top banks in consumer trust and satisfaction year after year.
By comparison, over the last 15 years net income for Iowa-based banks has grown by $344 million and they have recorded 10 straight quarters of record profits. And when it comes to size and market dominance, banks still dwarf the competition, controlling almost 90 percent of the deposits in Iowa. There are about 6,500 credit unions in the United States, and Wells Fargo’s assets alone are greater than all credit unions combined.
Iowa credit unions help keep bank fees and rates in check, while instilling trust in the members who own them and providing a needed choice in our state. A marketplace without credit unions would be a much scarier environment for Iowa consumers.
I urge our elected officials to remember this cautionary tale of unethical banking the next time a banker complains about the choice and competition credit unions provide in the marketplace. Every consumer has a right to choose a trusted financial partner that fits his or her values. Every Iowan deserves access to a credit union.
• Patrick S. Jury is president and CEO of the Iowa Credit Union League.