Wells Fargo Pays $5.4M for 450 Additional Illegal Servicemember Repos | Auto Finance News | Auto Finance News

Wells Fargo Pays $5.4M for 450 Additional Illegal Servicemember Repos

Wells Fargo Dealer Services on Tuesday agreed to pay the Justice Department an additional $5.4 million to compensate 450 servicemembers whose vehicles were illegally repossessed and not identified through the original 2016 settlement.   

In 2016, the company agreed to settle claims that it had violated the Servicemembers Civil Relief Act by improperly repossessing vehicles from 413 servicemembers — some of them serving active-duty assignments.

These additional 450 borrowers the company identified more than doubles the initial estimate, bringing the total number of affected borrowers up to 863 between 2008 and July 2015.

The same parameters from the original settlement apply: Wells Fargo is to pay $10,000 to each of the affected servicemember, plus any lost equity in the vehicle with interest. That brings the total payout to borrowers up to $10.1 million. Adding in the original $20 million fine, the total cost to the company comes out to $29.4 million.  

“As part of our commitment to a comprehensive, ongoing account review process and as part of our consent order work, we recently identified additional auto customers who are eligible for remediation,” a spokeswoman with Wells Fargo Dealer Services told Auto Finance News. “We are in the process of notifying and compensating those customers in keeping with our commitment to ensuring all service member customers have the protections and benefits available to them under the Servicemembers Civil Relief Act (SCRA).”

Earlier this year, Wells Fargo also admitted to forcing consumers to purchase auto insurance they were already paying for from an outside source. The lender preemptively paid $80 million in remediations to 500,000 consumers it had identified. The company is investigating overlap between the consumers who were wrongfully charged for insurance and the servicemembers whose vehicles were repossessed. 

“Some customers eligible for SCRA remediation may have also had CPI improperly placed on their accounts,” the spokeswoman said. “These customers will be reviewed for CPI remediation, regardless of whether they received remediation under the existing SCRA consent order. We are in the process of reviewing these accounts now to determine appropriate CPI-related remediation.”

In this collateral protection insurance case, too, there is reason to believe the number of affected consumers could actually reach 800,000, according to a report obtained by the New York Times. The Office of the Comptroller of the Currency in a leaked report found the company’s $80 million payout to consumers “insufficient.”

Of those consumers who were forced to buy insurance — as identified in an internal report conducted by Oliver Wyman and issued by Wells Fargo — 25,000 of them fell into repossession including active-duty servicemembers.

“The SCRA provides important protections and is intended to prevent unnecessary financial hardship for the brave women and men who serve in our armed forces,” Sandra Brown, acting United States attorney, said in a press release. “Losing an automobile through an unlawful repossession while serving our country is a problem servicemembers should not have to confront. We are pleased that Wells Fargo is taking action to compensate these additional servicemembers as required under the settlement with the Justice Department.”

 

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