By on November 7, 2018

Wells Fargo, Mike Mozart/Flickr (CC BY 2.0)

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)]

 

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11 Comments on “New Lawsuit Alleges Wells Fargo Execs Knew About Auto Insurance Scam for Years...”


  • avatar
    phxmotor

    When the Big Banks did away with Glass-Steagle (under Clinton suprize suprize) we all get to plainly see why Glass-Steagle was written in the first place.
    Banks do illegal things. They have proven this time after time. They can not stop themselves.
    Unregulated capitalism ceases to be moral. And this is from a staunch capitalist. But unregulated it ceases to be a system worth living under. For the good of capitalism… it must be carefully regulated…. or it destroys itself.

    We used to have Statesmen. Now? It’s naive and gullible child-men legislators who’s only redeeming quality is that they can make a good speech… but they are otherwise totally and pathetically useless. Child men who areLed around by the nose by the likes of Big Bank Lobbyists.
    The common citizen? Fuk ‘em.
    Complete contempt for their customer-victims. Peasants to be plucked.
    Big Banks… Fuk ‘em.

  • avatar
    chuckrs

    Never had a problem with Wells Fargo, but I have a decent credit score. I hope that the bulk of that $214MM goes to the people who were screwed over, not to the class action lawyers.

    Now, BoFA, that’s another story. Due to their shenanigans I got two of those postage stamp value consumer settlements, plus two similar ones as a stockholder. Tame idiot class action lead plaintiffs got a nominal settlement and the lawyers got the lion’s share. I certainly don’t like bank stocks very much and BoFA and Wells are on my list of avoid if possible as a consumer.

    • 0 avatar
      civicjohn

      Well you can forget about thinking the people who actually were misled will get their money back, they may get a paperweight or something like that. Class action = lawyers win.

      My only advice is that I follow Jamie Dixon (JPMorgan Chase), he delivers every quarter, P/E under 14 and a 3% yield.

      I keep waiting for the other shoe to drop with Wells Fargo, but even their ads about how they were “reinvented in 2018” is a bald-faced lie. I’m always looking for a beat-up stock, but WF is like Barney Fife with a bullet in his shirt pocket.

    • 0 avatar
      highdesertcat

      “Never had a problem with Wells Fargo”

      What Wells got caught doing was/is pretty much standard practice across the financial industry. They take what they can, any which way they can.

      I was with Wells. I was with BoA. I was with other financial institutions. My take on the matter is that there is no place like USAA.

      USAA is THE place to be for ALL your financial wants and needs. The caveat is, of course, do you qualify? Can you qualify?

      If you don’t or can’t, then in essence you are one of the fish that the other financial institutions feast on.

      And feast they do.

      • 0 avatar
        RHD

        A good credit union is better on all counts than banks, especially the perennially crooked big-name banks.
        If you have to pay anything at all for your checking account, you’re at the wrong financial institution.
        My credit union pays 7% interest on the first $500 in savings. Most banks pay in the hundredths of one percent, if any interest at all.

      • 0 avatar
        civicjohn

        @highdesertcat, I completely agree with your comments about USAA. I wish I could join, but the closest person with military service was my stepfather, who served in the Korean War.

        I looked at their site and I don’t think that passes the test. Am I correct in my assumption?

        • 0 avatar
          jkross22

          You’re right. My grandfather was a diesel engine repair teacher during WWII and I don’t qualify.

          • 0 avatar
            highdesertcat

            Guys, I’m NOT the final say-so on whether you qualify so you SHOULD APPLY and let USAA make their own final determination.

            They do a thorough screening and credit check beforehand, but they let my #2 son’s stepkids join even though they were fully grown and on their own with a different last name than his.

            USAA is very fair-minded, even when dealing with losses/claims. No reason to think otherwise when it comes to the application process.

  • avatar
    tylanner

    Incredible to me that every single WF customer hasn’t divested every single cent from this company…

  • avatar
    nrd515

    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.

  • avatar
    civicjohn

    @highdesertcat, thank you for the information. I’m going to apply and see what happens. Very much appreciated.


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