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.
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.
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