Wells Fargo's Forced-Insurance Compensation Was 'Insufficient,' OCC Finds | Auto Finance News

Wells Fargo’s Forced-Insurance Compensation Was ‘Insufficient,’ OCC Finds

The Office of the Comptroller of the Currency found that Wells Fargo & Co.’s previous $80 million payout to consumers affected by its force-placed insurance scandal was “insufficient,” according to a document that was leaked on Friday that widely criticized the lender’s practices.

Although the OCC report — which was leaked to The New York Times — does not detail additional fines or penalties on the bank, it does lay out a series of violations and says that the bank may have to pay out “substantially more” to the victims.

In July, The Times first reported the problems at Wells Fargo and the next day the bank proactively reimbursed consumers who were harmed by its practices. Wells Fargo’s internal review found that hundreds of thousands of consumers had been charged for collateral protection insurance, when the consumer did not need the coverage.

This force-placed insurance product automatically charges consumers for comprehensive and collision coverage if they have not already purchased it from an outside source. The review revealed that 800,000 consumers had been wrongly charged for the coverage sending 274,000 borrowers into delinquency, and led to 25,000 wrongful repossessions. Yet, Wells Fargo disputed those findings and only provided compensation to 500,000 consumers.

Now, this latest report from the OCC has found that Wells Fargo has not set aside enough money to properly reimburse those customers that it has identified, nor did the money sufficiently cover all those consumers impacted.

Wells Fargo’s reimbursements only covered a period from January 2012 through July 2017, but the CPI program has been in place since 2005 and the OCC found that the bank did not calculate payments for much of that period.

The OCC also found that the bank used “an overly complicated reimbursement methodology, which lacked clear support for addressing all the customer costs incurred,” according to the report.

AFN previously reported that the OCC and Consumer Financial Protection Bureau were investigating the bank’s auto insurance practices, but this report also adds the Federal Trade Commission to the list of interested regulators. When the bank first originated these loans it hid the cost of the insurance within the monthly payment, which may be a violation of the Federal Trade Commission Act prohibiting unfair or deceptive acts in commerce, according to the report.

“There is an ongoing remediation to make things right for customers who were negatively impacted,” a Wells Fargo spokeswoman told Auto Finance News. “We have hired new leaders in our auto lending business and have made significant changes over the past several months to strengthen controls and vendor oversight. We are also working to enhance our customer care program and improve complaints resolution. We will continue to work with regulators on the remediation and will make improvements to our auto lending business to build a better Wells Fargo.”

National General was Wells Fargo’s CPI provider and the report details the bank’s lapse in oversight over the vendor. Wells Fargo auditors discovered the customer complaints back in 2015, but the OCC found that Well Fargo did not act promptly to address those complaints. The bank stopped placing CPI policies in September 2016.

Finally, the report deemed Wells Fargo Dealer Services’ compliance management program as “weak,” given that the bank identified the auto department as low risk in 2015.   

For more Wells Fargo news, click here.

For more content like this, check out the 17th annual Auto Finance Summit, which will take place on Oct. 25-27 at the Wynn Las Vegas. To learn more about this year’s event — or to register — visit the Summit’s homepage here.

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7 thoughts on “Wells Fargo’s Forced-Insurance Compensation Was ‘Insufficient,’ OCC Finds

  1. Goodevening I would like to thank you for having this form.
    I am former customer of Wells Fargo, and reason for this is that on June 24, 2005 I awoke to my door bell ring constantly. Well to my surprise as I looked out onto the street a man was walking back to a tow truck with my vehicle attatched. As I called out to him he stopped and returned to my door as I came to meet him. He asked me to idetify my self- I did then he said ” I got your car, I just did not feel right about this repo” when I asked why he said (glacing at a paper with instructions for this job) “lady you know what you owe them” so I asked to let me see the paper. It read in tge area marked “LOAN INFORMATION AND DELENQUENCY:” PAST DUE:0(zero), TOTAL PAST DUE:0(zero),& LATE CHARGE:0(zero). Now this was setinto action by Darryl King Wells Fargo Financial2501 Seaport Dr. Suite BH-300, Chester, PA 190131510.(copy on file under Atterney General Public Inquiry Unit#131090-346 pages.) Next May 16, 2008 via Consumer Affairs Case# DR07-0892. Afterwards July 31, 2008 I sent one last response letters to c/o Don Grisinger County of Los Angeles Department of Consumer Affairs – subject: California Laws & Regulation Z (instalment contract-2d/” Statement of Insurance) paragrah (2) of subsection (e) of section 226.4 of Regulation Z, agreement charges as provided by section 1807.1, or amounts of insurance. Regulation Z Federal Truth in Lending Act as amended (15 U.S.C. 1601, et seq.) Board of Govenors of the Federal Reserve System. Further in view of libel reading. “Finance Charge” does not include the amounts, if any, charged for insurance premiums, including premium California Civil Code Section 1802.10 as stated above. (4pages)
    And most recent correspondence

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