New Lawsuit Alleges Wells Fargo Execs Knew About Auto Insurance Scam for Years

Roughly a year ago, Wells Fargo got itself into hot water over shady business practices relating to widespread auto insurance and mortgage lending abuse. After a lengthy investigation, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency eventually suggested Well Fargo pay $1 billion to “resolve” the governmental probes. President Donald Trump then said federal agencies needed to go after the bank hard to set an example. The agencies came back with a consent order saying it was time to pay up.

Despite the insurance issue affecting an estimated 800,000 customers over a four-year period, Wells Fargo seemed able to recover from the scandal and move past it. However, new allegations claim the bank’s leadership was aware customers were probably being overcharged several years before it finally cancelled the program.

The insurance program ended in 2016, right around the time government agencies took an interest. Before that, Wells Fargo was charging thousands of auto loan customers for insurance they didn’t need and often didn’t even know about — causing some to default on loans and have their vehicles repossessed. The bank ultimately compensated those individuals, citing corporate ignorance as the primary culprit.

According to Reuters, documents from a class-action lawsuit unsealed on Monday point the finger at several executives who were briefed in 2012 about flaws in the auto insurance program. Several executives, including then-General Counsel James Strother and chief auditor David Julian, are among the accused.

While the bank had a legal right to force auto borrowers into purchasing collateral protection insurance (CPI) if they let their own policies lapse, Well Fargo admitted it accidentally forced around 600,000 customers into CPI that already had insurance. Many did not know about the secondary policy and neglected to pay it — resulting in fines and, occasionally, repossession of their vehicle.

This, of course, follows an earlier incident where the bank admitted that certain branches opened millions of phony accounts in customers’ names without their permission in order to reach sales targets. Keeping that in mind, the auto insurance and mortgage abuse seems a little less innocent.

From Reuters:

The lawsuit was originally filed in U.S. District Court, Central District of California, in August. Wells Fargo has fought to keep some details of the case under seal.

The plaintiffs say they are customers seeking reimbursement for wrongful charges, and allege Wells Fargo pushed drivers with poor credit into policies more often than well-off customers.

Wells Fargo was 10 times more likely to force borrowers with damaged credit into CPI insurance than those with high credit scores, according to the lawsuit, which cites an internal bank presentation.

Thus far, the company is working on a remediation plan and hopes to finalize things soon. Wells Fargo initially estimated remediation efforts would cost $64 million. That sum increased after it was determined more borrowers were owed greater amounts. In its third quarter, Wells Fargo set aside $241 million for those affected customers.

[Image: Mike Mozart/ Flickr ( CC BY 2.0)]