Wells Fargo announced last week that it would reimburse at least $80 million to over 500,000 customers that were charged for car collateral protection insurance between 2012 and 2017 they didn’t ask for or need Unsurprisingly, now regulators are pushing for answers and customers have filed a class-action lawsuit.
While no one has filed any criminal charges at this time, the New York Attorney General Eric Schneiderman and New York’s Department of Financial Services issued subpoenas to two bank units and to financial consultant Oliver Wyman probing for more information of any wrongdoing. The scandal at Wells Fargo was uncovered, according to the company, after an internal audit conducted by Mr. Wyman. Wells Fargo admitted that their internal review of its auto lending found at least 570,000 bank clients that may have unwittingly been charged for collateral protection against vehicle loss or damage through Wells Fargo’s partner, National General Insurance Co. (The Department of Financial Services has also issued a subpoena to National General.) This was in addition to their monthly loan payments and even though many drivers already had their own policies. This bears a striking similarity to the previous scandal at the San Francisco-based bank, which signed up customers for bank accounts without their knowledge and bled them for excess fees.
It gets worse. Wells Fargo admits that their auto lending practices may have pushed thousands of car buyers into loan defaults and repossessions by defrauding them with unwanted insurance. The firm has put aside extra money for as many as 20,000 customers (or should we say marks) that lost their vehicles. Something tells me that won’t be enough. Who knows how many customers were pushed into financial ruin after they lost their vehicle or defaulted on their loan, potentially leading to lost employment, bad credit rating, or other hardship? Frankly, we suspect that Wells Fargo and National General made a healthy profit on legitimate auto insurance but couldn’t resist gouging their customers. This level of rank greed coming on the heels of their fake accounts scandal demonstrates that Wells Fargo is rotten to the core. Our first recommendation to any remaining customers? Find a new financial institution. Our second? Hire a lawyer.
It looks like some of the bank’s victims are thinking the same thing. Multiple customers filed suit once the scandal emerged. One proposed class-action suit accused the bank of fraud and racketeering given that the bank has admitted to charging several hundred thousand borrowers for auto insurance without their express permission. While Wells Fargo might hope that $80 million will cover it, it looks like regulators and angry clients don’t agree. Roland Tellis, a lawyer for the plaintiffs, sums it up best for CNBC: “Wells Fargo has long lost the right to decide what is best for its customers.”