Wells Fargo Dealer Services charged more than 800,000 consumers for auto insurance they could not afford — sending nearly 274,000 borrowers into delinquency between 2012 and 2016, according to a 60-page report prepared by consulting firm Oliver Wyman.
The bank also wrongfully repossessed some 25,000 vehicles, including those of active duty military members, according to a report from The New York Times yesterday.
Although the bank denies some of the figures in the report, Wells Fargo confirmed that the practices took place, and today agreed to refund $80 million to consumers affected.
“We have a huge responsibility and fell short of our ideals for managing and providing oversight of the third-party vendor and our own operations,” Franklin Codel, the head of consumer lending at Wells Fargo, said in a statement. “We self-identified this issue, and we made the right business decisions to end the placement of the product.”
Customers’ auto loan contracts require them to maintain comprehensive and collision physical damage insurance on behalf of the lender throughout the term of the loan. Wells Fargo would purchase Collateral Protection Insurance from a vendor — National General — on the customer’s behalf if the customer already had the required insurance, the company said in a statement.
However, the report details how consumers who already purchased insurance separatly were charged double through this policy, sending many into delinquency. Many consumers never reported the problem because it went unnoticed in automatic withdrawals from their bank accounts.
Wells Fargo reviewed policies between 2012 and 2017 and identified 570,000 customers who may have been impacted — 230,000 short of what the report identified. In total, approximately $64 million of cash remediation will be sent to customers in the coming months, along with $16 million of account adjustments, for a total of approximately $80 million in refunds, the company said.
“In the fall of last year, our CEO and our entire leadership team committed to build a better bank and be transparent about those efforts,” said Codel. “Our actions over the past year show we are acting on this commitment.”
In response to customer concerns, Wells Fargo initiated a review of the CPI program and related third-party vendor practices in July 2016. Based on the initial findings, the company discontinued its CPI program in September 2016.
Also in September 2016, an investigation under the Department of Justice and Comptroller of the Currency resulted in a $24 million consent order in the fall for illegal repossession of vehicles from 413 service members.
Starting in August 2017, Wells Fargo will reach out to impacted customers with letters and refund checks. Wells Fargo will also work with the credit bureaus to correct customer’s’ credit records, if applicable.Like This Post