By on August 11, 2017

wells fargo

California’s insurance regulators have launched an investigation into Wells Fargo following the bank’s confession that it forced hundreds of thousands of auto loan borrowers to pay for insurance policies they didn’t need and, in many cases, were unaware of.

There’s also a congressional investigation underway, where U.S. senators are asking the company basic questions like who was affected, how broadly, whether they get a refund, and why the hell this occurred in the first place.

Unlike JPMorgan Chase or Bank of America, Wells Fargo’s auto loan contracts allowed the lender to obtain collateral protection insurance on a customer’s behalf if they failed to buy liability coverage themselves — or if the bank assumed they hadn’t. It’s not common practice and, when it causes paying customers to default and have their vehicle repossessed, it’s not difficult to see why. 

Samir Hanef, a longterm customer of Wells Fargo, serves as a case study for how badly this can go awry. According to CNN Money, he obtained an car loan in June 2014 to purchase a used Honda Civic — paying $300 per month, even though the bill was $280.

In March of 2016, Wells Fargo increased his monthly bill to $374 after adding the collateral protection insurance without his knowledge. Having purchased insurance previously, Hanef claims not to have noticed the alteration since his bill had gone unchanged for roughly two years. He continued paying his $300 a month until the bank repossessed his Civic in December. “My car was held as extortion and I was forced to pay for Wells Fargo’s mistake,” he told CNN.

“My insurance never lapsed,” he added. While the bank claims it sent notices about the new insurance fees, Hanef says he never noticed any.

Cases like this one have investigators up in arms. Wells Fargo is promising to make wronged consumers “whole” but it’s unclear who that applies to. At least 20,000 customers saw their vehicles repossessed but as many as ten times that defaulted on payments. There are also hundreds of thousands more charged for insurance they technically never needed, but the bank has been less clear on issuing them a refund.

Laws in nine states require that customers get unused insurance money back: Alabama, Colorado, Indiana, Iowa, Maryland, Massachusetts, Oklahoma, Oregon and South Carolina. However, Wells Fargo’s unsavory business practices has regulators in other states feeling that their citizens may also be deserving of reimbursement.

In a Securities and Exchange Commission filing last week, the bank expressed numerous problems with guaranteed automobile protection (GAP) insurance policies. These policies cover the difference between a car’s value and the amount a borrower owes on it. The concept is that, if a wrecks their vehicle, the insurance policy covers the difference between their remaining payments due and any payout from the borrower’s regular insurance.

Even though those policies are typically sold by dealerships and arranged through third-party insurance companies, the cost of the policies is almost always baked into the car loan. If a borrower pays off the loan early, they no longer need the insurance and are supposed to be reimbursed.

That refund typically comes from the dealership, but in some states require the lender to ensure the refunds are made. In last week’s SEC filing, Wells Fargo said it “identified certain issues related to the unused portion of guaranteed automobile protection waiver or insurance agreements,” and that the issues “may result in refunds to customers in certain states.” However, it did not specify which ones.

Insurance Commissioner Dave Jones said Tuesday that he ordered the California Department of Insurance to investigate Wells Fargo and insurance provider National General Insurance Co. to see if the companies broke any state laws.

“These most recent revelations by Wells Fargo are particularly troubling,” said Jones in a statement. “The department will investigate fully to determine the extent to which California consumers were affected by improper placement of force or lender-placed auto insurance and seek corrective action and penalties in the event that California’s consumer protection laws were violated.”

The bank is also under investigation by the New York Department of Financial Services, which subpoenaed records related to the insurance policies last week. Wells Fargo has to provide the information by August 22nd.

Senator Elizabeth Warren and some of her Democrat colleagues want to speak to Wells Fargo CEO Tim Sloan and Chairman Stephen Sanger about the recent scandals personally. This week, they wrote a letter to Mike Crapo, the Republican chairman of the Senate banking committee, requesting a September hearing.

[Image: Ron Cogswell/Flickr (CC BY 2.0)]

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58 Comments on “Wells Fargo Under Intense Investigation Following Auto Insurance Scandal...”


  • avatar
    FreedMike

    Good to know I made the right call when I dumped my Wells bank accounts last year…

  • avatar
    Heino

    This is why we need smaller gubmint, so all banks can do this.

    • 0 avatar
      JimZ

      Gee, it’s almost as if regulations get passed for a reason, not just because those eeeevil libruhls want to control those poor, downttrodden inventors and Job Creators(TM).

      • 0 avatar
        stuki

        You got in backwards. They get passed, in order to ensure the banksters who call themselves Job Creators(tm), retain control over the libruhls. As well as over cuckservatives. Next time some new regulation in this area is debated and passed, who do you think will be given the most time and opportunity to go in front of congress to influence it; some bankster CEO, or some random guy with an auto loan? Same guy Elizabeth Warren wants to speak to now, right??

    • 0 avatar
      FreedMike

      The counterargument would be that this happened despite regulation, and there’s more than a little truth to that.

      But then again, the same folks who would make that argument would also argue that “the market” should correct behavior like this. And it won’t. That’s where regulation really becomes necessary.

      • 0 avatar
        jkross22

        The market could correct if Wells Fargo commercial and retail customers left and opened accounts at community banks or credit unions.

        What do you think would happen to WF’s stock price and bonus programs if 30% of their customers walked?

        But we’re all too busy/lazy/disinterested to do that, so WF lives to rip off more people another day.

    • 0 avatar
      Adam Tonge

      Nah. The Federal Government loves big banks.

      The Great Recession measures that were taken by the Feds and the Federal Reserve actually helped the big banks. They all got almost free money, additional assets, and the federal government back stopping some of their loans. Chase, Bank of America, Wells, and Citi all ended up in better spots post Dodd-Frank/recession. Jamie Dimon wants Dodd-Frank to stick around.

  • avatar
    dukeisduke

    Awesome, another huge scandal for Wells Fargo. I smell an acquisition coming.

  • avatar
    DeadWeight

    Scumbab of stigmata, Wells Fargo, should be literally sued by regulatory age does and consumers into closing its doors, for good.

    What a cesspool.

    On the larger matter of banks, I look forward to the day that sickest p rick You mortar banks (especially those subsidized by the Federal Reserve’s taxpayer-supplied artificially low overnight fed funds rates) see their business models rendered moot by new competitors that aren’t zombie entities kept alive by biggov.org.

    • 0 avatar
      87 Morgan

      This.
      If the big banks actually paid for FDIC insurance that was relevant to the risks they carry on their books: derivatives etc.

      It is my understanding that all banks pay the same rate. If the requirement was deposit insurance was required, but not provided by the Feds and the banks actually had to have an insurer go through their books to monetize the risk of defualt etc we would get a couple of things:
      1. no more too big to fail.
      2. Tax payers out of the banking business
      3. Private enterprise managing the ‘free market’ (which are not free…)
      4. Most likely, the break up of the big banks as no insurance company that I can think of would get involved with deposit insurance as they premium would be too high for the bank to pay.

      We need more small independently owned and operated banks, not 4 large banks with the equivalent to the economy of a large European country on their books.

      Crap, that is 2x this week I have agreed with DW…I still love my 3 GM products though!

      • 0 avatar
        DeadWeight

        Just bringing back a real Glass-Steagall Act and really enforcing it would end 90% of the zombie, crapified, parasite, taxpayer-leeching banks, alone.

        • 0 avatar
          jkross22

          “Just bringing back a real Glass-Steagall Act”

          Never. Gonna. Happen. Google the double talk Mnuchin gave when asked about his support for a 21st century GS. It’s disgusting.

          • 0 avatar
            DeadWeight

            Dogma and Citizens United rule American Politics, Government and to large extent, society, now.

            The death of common sense and moderstion is killing our nation, as everything (or almost all things) are pitched as and sold as “binary choices.

          • 0 avatar
            joeaverage

            Binary choices. I like that. Gonna use it the next small gov’t enthusiast that corners me.

  • avatar
    JimC2

    Not the first time we’ve had the “it’s expensive to be poor” theme pop up here on TTAC. The last time, about a year ago, I think we were talking about cheap cars breaking down a lot and about unreliable transportation to jobs (employment) that don’t always pay well enough for more reliable transportation.

    This time it’s about Wells Fargo, an ostensibly resourceful corporation who really oughtta be better than such buffoonery, using some bizarre, modern day Ebenezer Scrooge business model. (Not his final business model, I mean the one from before the three ghosts.)

  • avatar
    johnnyz

    The real criminals are at the top of major corporations and banks. WF took over Wacovia, which had been laundering drug money for years – criminal bankers.

    Opium production has peaked in Afganistan, who pays and distributes? Criminal cartels. End the war on drugs!

  • avatar
    jmath52

    Wells Fargo needs to go away and be buried under some rock. They are crooked and unethical. They have already proven that. I wouldn’t go near Wells Fargo with a 2,000 foot pole.

  • avatar
    Detroit-Iron

    Like the joke goes, I will believe corporations are people when Texas executes one. If nobody does time for this then the Republic is doomed.

  • avatar
    jmo

    I’m sure you’ll be happy to know that in order to reduce the burden of our job creators, Wells Fargo can’t be sued in this matter*. Rather then a class action suit that gets everyone paid, in this case everyone would need to go to arbitration individually. Unless of course, out of the kindness of its hart, Wells Fargo decided to pay up.

    * “…financial contracts frequently contain forced arbitration clauses buried in the fine print. These anti-consumer clauses require that all disputes between consumers and the institution are dealt with in a secretive and often rigged arbitration system.”

  • avatar
    DeadWeight

    I long for the day when the vestigial, parasitic banks (kept alive by fed funds rates) and credit card companies (a Cartel of criminals) meet their death.

    Throw the regional cable companies in that lot, too, such as Comcast, which exist because local branches of government are bribed into letting monopoly contracts to such “service provider.”

    • 0 avatar
      johnnyz

      Bitcoin and other crypto’s may liberate the banking cartels from their monopoly.

      Comcast sux! A monopoly that keeps it’s status with bribes and political contributions. Deregulate!

      • 0 avatar
        FreedMike

        “Deregulate”!

        Easy to say, harder to do.

        I worked for MCI in the ’90s when we were trying to do local landline service. That was deregulated too. In the end, we just resold the local Bells’ services.

        Anything that involves running a line from a central office to a customer’s house is DEADLY expensive. You can de-regulate all you want but who’s going to spend billions of dollars to replicate the last-mile network of Comcast (or “insert cable company name here”)?

        Fact is, no one’s going to go into the cable business for the same reason. Therefore: the rise of satellite providers.

        And I will say this for cable providers: cable TV sucks but cable Internet is the bomb dot com compared to DSL.

        • 0 avatar
          DeadWeight

          This is Comcast’s last lifeline.

          If you cancel Comcast for cable, you’ll pay as much or nearly as much for just high speed interent service alone.

          Bring on the WiMAX technologies and similar offered by new companies to literally sever Comcast’s physical root.

          • 0 avatar
            johnnyz

            Streaming through a phone would be nice… coming soon. F Comcast.

            When the phone co. deregulated my long distance got cut by 70%!

            Im a capitalist/ Libertarian but you have to reckognise a monopoly, Comcast is it.

          • 0 avatar
            mcs

            There is a new internet service provider coming in the near future:

            https://phys.org/news/2017-05-spacex-thousands-internet-satellites.html

        • 0 avatar
          joeaverage

          We have DSL b/c we won’t deal with the local cable company whose prices climb year after year. The prices I hear friends and coworkers quote would pay for a decent commuter car – new.

          We cut the TV cord years ago and get by with a couple streaming services – yep, over DSL.

          Works fine.

  • avatar
    bikegoesbaa

    I’m amazed that anybody still has a Wells Fargo account. At this point they’ve proven themselves to be at best incompetent and at worst downright malicious.

    There’s no shortage of good local credit unions who give good service, competitive rates, and will meet all the banking requirements of 99% of Americans. They’re also demonstrably less evil than the for-profit big banks, and much easier to interact with.

    I can get in touch with a helpful person at my credit union with a single direct phone call during business hours; and at any time the person I’m talking to is at most about 4 people away from the Board of Directors – who I get to elect. When I do have a question or concern it gets resolved immediately.

    It is incomprehensible to me that normal people who do not require complex high-finance services choose to bank with Wells Fargo, BOA, and their ilk. Just get a good credit union and never look back.

    • 0 avatar
      brettc

      Community banks can also be a good alternative to the giant banks. CUs and small banks generally care about their customers.

      BoA, Wells Fargo and the rest of the big ones only care about the bottom line and will do extremely greasy things to pad it.

    • 0 avatar
      johnnyz

      Proximity. As someone that frequents my bank branch, I need one close to my house. I am a dissatisfied WF customer.

      • 0 avatar
        FreedMike

        And services. Large banks provide services (like mobile banking and deposits, etc) that small banks either don’t provide, or do poorly. I looked into several local banks and passed on them in favor of Chase.

        (The $300 Chase bribed me with didn’t hurt).

        • 0 avatar
          Adam Tonge

          Chase’s online banking and mobile app are the best in the industry.

          However, I work at a smaller credit union and our app is about 95% of the way there. The online banking….not so much. Once we have an updated consistent experience between the app and online banking (early 2018), I will no longer see the point of anyone banking with Chase instead.

          I used to work at Chase. I still have an account there. Now it’s more of my wife not wanting to move bill pays she already set up.

          • 0 avatar
            jkross22

            Adam, If the account was at WF instead of Chase, would your wife be convinced to move it elsewhere in light of WF’s customer-hostile policies, or is the convenience compelling enough to keep her where she is?

            I can’t get my wife to leave B of A for this reason. Even though there’s a smaller bank across the freaking street.

          • 0 avatar

            I have been pleased with Chase credit card services for a number of years.

          • 0 avatar
            Adam Tonge

            I think if I pushed hard, she might budge. We have an account at the credit union I work at, but it isn’t our primary account. We save money for vacations, Christmas, our daughter, etc there. Once our new online banking is live in Q1 of 2018, I think it’ll be easier. She likes that Chase online banking/app a lot.

            Having used BofA’s online banking, I don’t know why anyone would use it over a credit union. It isn’t that good. It isn’t bad, but it doesn’t warrant what you have to deal with.

      • 0 avatar
        jkross22

        What is it that you need a bank branch to do? If you’re not a small, cash business, why need a bank branch? Truly, I don’t get it.

    • 0 avatar
      Adam Tonge

      bikegoesbaa is correct. I work at a credit union. I am three steps from the board. I take members calls everyday. Our phone menu can even give you a direct line to my desk.

  • avatar

    I’m spread all over the map. Credit card with Chase (good), bank with US Bank (good) and mortgage with Wells (mostly good apart from phone CS).

  • avatar
    stevelovescars

    I switched from Chase to a local credit union about 2 years ago and have saved a ton in fees. They offer online banking and bill paying just like Chase did. Their credit card only charges 6.5% and their checking account actually pays 3% interest, which I still can’t believe except I see the statements every month.

    It took some work to switch everything over since I had some auto-pay accounts, but it wasn’t really that hard… and definitely worth it.

    And while I try to avoid Wells Fargo, my mortgage was sold them them so I still have to deal with them albeit not by choice.

    If, as the article states, more than 20k people had cars repossessed by WF and many times that many missed higher payments, I have little problem believing that the bank did little to inform their customers about the higher payments. That would have raised questions earlier after all.

    Steve

  • avatar
    SirRaoulDuke

    For a few long months in 2008-2009 I worked auto collections for WF. That is the most unethical, illegal-acting outfit you have ever seen. It’s the only job my personal ethics made me quit…and I’ve worked for some real scumbags and not quit. We were routinely told to violate federal and state collections laws, falsify records, all kinds of crap. On a scale of ethics I would rate WF somewhere between pimp and a dog beater.

  • avatar
    Publius

    What’s not in the article is that this type of “lender-placed” or “forced-placed” insurance usually costs substantially more than ordinary auto insurance, with significant commissions or financial incentives for those involved in the placement. Wells Fargo almost certainly earned a commission as the agent on each sale of a policy.

  • avatar
    probert

    Isn’t it time to simply declare Wells Fargo a criminal enterprise and be done with it.

  • avatar
    Erikstrawn

    Isn’t GAP insurance just another way to try to launder the risk in sub-prime lending? Shouldn’t the risk just be a part of the loan? If you’re a bank, and someone is too risky to lend money to, then GAP insurance is just your way of convincing someone else to take the risk of the loan defaulting. Of course, that person gives the bill for the insurance to the person getting the loan. Shouldn’t the lender just ask a higher rate? It’s not like people really shop around for good rates when the dealer has that hook in their mouth.

    • 0 avatar
      JimC2

      It probably depends who you ask. If it’s somebody who stands to benefit from the gap insurance payments, you’ll probably get the answer in a “you’re not smart enough to understand gap insurance, just sign here” tone of voice…


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