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.
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.
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- Jalop1991 I expected a COMPLETELY different article.
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I had a credit card with WF years ago and I killed it off after paying it off. I still have a couple of BoA accounts, but those are on my kill list. I'm either going to transfer them to another bank's card, or just pay them off and then kill them. I've already told them why,the BS annual fees and one one of them, a very high interest rate. If they don't drop it down to the other one's rate, I will get rid it, ASAP. If I could go back in time, I would have rethought some of the financial choices we made in the 90's and early '00's and just stayed home and lived as cheaply as was possible and paid off everything I owed. I have plenty of money coming in, it's just how much is going out to CC debt that was a necessary evil at the time it was created.
@highdesertcat, thank you for the information. I’m going to apply and see what happens. Very much appreciated.