Wells Fargo & Co. and National General Insurance Co. will reconvene at the U.S. District Court of Santa Ana, Calif., on July 8 for preliminary approval on a proposed $393.5 million settlement, according to a court filing published yesterday.
Wells Fargo has agreed to pay $386 million and National General will pay $7.5 million in a proposed class-action settlement to resolve claims the companies engaged in an “unlawful scheme to force millions of Wells Fargo auto loan customers to pay for unnecessary and unwanted Collateral Protection Insurance,” according to a June 6 court filing. Wells Fargo’s settlement is six times the original $64 million remediation plan the bank had proposed prior to the start of the litigation, the filing noted.
Wells Fargo has denied wrongdoing in the case.
Wells Fargo spokesman Kurt Schroeder told AFN in an email the settlement was a step to “making things right for customers impacted by this issue,” noting that the bank will “continue sending individualized letters to customers that clearly set out the remediation amount due to them, as well as a check for that amount.”
This is how the scheme played out, according to the filing: Wells Fargo would purchase CPI from National General and force-place the CPI on its auto loan borrowers’ accounts. Then, Wells Fargo assessed a full year’s worth of CPI charges against the borrowers’ account and charge interest each month on the insurance premium before applying payments to a customer’s principle loan balance, ensuring Wells Fargo CPI charges were paid before the principal balance, causing borrowers to fall behind on payments and default on the underlying loan. Wells Fargo also “tacked on an unearned commission” paid by National General.
Settlement class members will receive refunds for account fees, insurance premiums, interest charges, additional interest accrued on their loan balances as they relate to the duplicative CPI, the document said. Adjustments will also be made mitigate adverse credit reporting from CPI.
It took five in-person meetings between the plaintiffs and defendants to come to an agreement on April 5. It took another two months to finalize the settlement agreements.Like This Post