SAN FRANCISCO–Wells Fargo’s woes are not over, as a new program that charged customers for unneeded services has been revealed.
The bank has acknowledged that more than 800,000 customers with car loans at Wells Fargo were charged for auto insurance they did not need, with some still paying for it, according to an internal report that was prepared for Wells’ executives. Late last week, the bank said it would pay back approximately $80 million to customers who had been wrongly charged. That amount includes $64 million in cash and $16 million in account adjustments.
About 490,000 customers had duplicate vehicle coverage, while 60,000 did not receive complete disclosures from vendors prior to CPI coverage, the bank stated.
Compounding matters, the expense of the unneeded insurance, which covered collision damage, pushed roughly 274,000 Wells Fargo customers into delinquency and resulted in almost 20,000 wrongful vehicle repossessions, according to the 60-page report, which was obtained by The New York Times. Among the Wells Fargo customers hurt by the practice were military service members on active duty, the Times reported, which could mean violations of the Military Lending Act.
The latest revelations follow the $185-million fine levied against the bank in 2016 after it was discovered its employees had created some two-million bogus credit card and other accounts for bank customers as they struggled to meet hyper-aggressive cross-sales goals. That was followed by news that Wells Fargo had also made improper adjustments to the terms of the home loans of some customers who were in bankruptcy, as CUToday.info reported here.
Wells Fargo officials confirmed to The New York Times that the improper insurance practices took place and said the bank was determined to make customers whole. In a statement to the Times, the bank’s head of consumer lending, said, “We have a huge responsibility and fell short of our ideals for managing and providing oversight of the third-party vendor and our own operations. We self-identified this issue, and we made the right business decisions to end the placement of the product.”
According to the report prepared by consulting firm Oliver Wyman, the insurance policies were sold to bank customers from January 2012-July 2016. The insurance, which the bank required, was more expensive than auto insurance that customers often already had obtained on their own. The policies were underwritten by National General Insurance.
The Times explained that for borrowers, delinquencies arose quickly because of the way the bank charged for the insurance. “Say, for example, that a customer agreed to a monthly payment of $275 in principal and interest on her car loan, and arranged for the amount to be deducted from her bank account automatically,” the Times said. “If she were not advised about the insurance and it increased her monthly payment to, say, $325, her account could become overdrawn as soon as Wells Fargo added the coverage.”