Wells Fargo Reportedly Charged 570,000 Customers for Insurance they didn’t Request or need
Wells Fargo & Co. charged hundreds of thousands of auto-loan borrowers for insurance they did not ask for or need and some customers’ cars were repossessed because of this. In a news release, Wells Fargo stated that an internal bank investigation spurred by customer complaints found that, between 2012 and 2017, about 570,000 borrowers may have been wrongly pushed into these auto insurance policies. The issue centers on collateral-protection insurance policies, which are similar to auto insurance policies commonly taken out by vehicle owners to cover costs of damage to their vehicles. Wells Fargo plans to give them $80 million in refunds and compensation to try and remedy the issue. Franklin Codel, head of Wells Fargo Consumer Lending, stated:
We take full responsibility for our failure to appropriately manage the [insurance] program and are extremely sorry for any harm this caused our customers, who expect and deserve better from us. Upon our discovery, we acted swiftly to discontinue the program and immediately develop a plan to make impacted customers whole.
Lenders typically require that auto-loan customers have such policies and some lenders will buy a policy on customers’ behalf and pass along the cost if customers do not show they have secured their own auto insurance coverage. In this case, Wells Fargo acknowledged that it improperly bought such policies on behalf of customers who already had their own insurance, and sometimes failed to properly notify those customers that it was doing so. Most of the people affected, which is about 490,000, had their own insurance but were stuck with bank-issued policies as well and they will get refunds totaling $25 million. In 60,000 other cases, Wells Fargo said it did not follow state notification and disclosure laws and refunds to those customers will total $39 million.
Wells Fargo states that around 20,000 customers lost their vehicles because the cost of the unnecessary insurance pushed borrowers into default on their loans. Those customers will get refunds, plus additional payments to compensate them for the loss of their vehicles. The compensation will total $16 million, or an average of $800 per customer. The bank will also work with credit bureaus to correct customers’ credit records. It is good that Wells Fargo is trying to undo some of the wrong doings that its employees caused, but it may be some time before people are able to fully trust the bank again.