Wells Fargo in an­other scan­dal, this time in auto lend­ing

Kuwait Times - - BUSINESS -

Scan­dal-plagued Wells Fargo is back in hot wa­ter for sign­ing cus­tomers up for prod­ucts that they didn’t need or want. This time it’s auto in­sur­ance, and the bank says it may have cost about 20,000 peo­ple their cars. San Fran­cisco-based Wells Fargo ac­knowl­edged late Thurs­day that it en­rolled roughly 570,000 auto loan bor­row­ers for what’s known as col­lat­eral pro­duc­tion in­sur­ance on their ve­hi­cles when the cus­tomers al­ready had ap­pro­pri­ate in­sur­ance. It will pay $80 mil­lion in re­funds and ac­count ad­just­ments to those peo­ple.

“We take full re­spon­si­bil­ity for our fail­ure ... and are ex­tremely sorry for any harm this caused our cus­tomers, who ex­pect and de­serve bet­ter from us,” said Franklin Codel, the head of Wells Fargo Con­sumer Lend­ing, in a state­ment.

If the sit­u­a­tion seems fa­mil­iar, it is. Nearly a year ago, Wells Fargo ad­mit­ted that its em­ploy­ees opened up to 2 mil­lion ac­counts for cus­tomers with­out get­ting their per­mis­sion in or­der to meet overly ag­gres­sive sales goals. The bank paid $180 mil­lion in fines and penal­ties and re­cently reached a set­tle­ment to pay an ad­di­tional $142 mil­lion to cus­tomers through a clas­s­ac­tion law­suit.

That scan­dal cost then-CEO John Stumpf his job, and the bank’s on­ces­ter­ling in­dus­try rep­u­ta­tion was in tat­ters. The bank’s new man­age­ment has been try­ing to amends with cus­tomers, politi­cians and the pub­lic ever since. Politi­cians from both par­ties were an­gry with Wells Fargo when the scan­dal broke last year, and a cou­ple high­pro­file Democrats were quick to turn up the heat again.

“The con­stant drip drop of fraud­u­lent ac­tiv­i­ties com­ing out of Wells Fargo is ab­so­lutely out­ra­geous,” said Rep. Max­ine Wa­ters of Cal­i­for­nia, the top-rank­ing Demo­crat on the House Fi­nan­cial Ser­vices Com­mit­tee. Sen. El­iz­a­beth War­ren of Mas­sachusetts called for the Fed­eral Re­serve to re­move Wells’ board of di­rec­tors. This is not the first time Wells Fargo’s auto lend­ing busi­ness has come un­der scru­tiny. The bank reached a $4 mil­lion set­tle­ment with the Jus­tice De­part­ment last Septem­ber for il­le­gally re­pos­sess­ing ve­hi­cles from ser­vice­men and women.

In this case, the bank re­viewed auto poli­cies placed be­tween 2012 and 2017. Like most auto loan com­pa­nies, Wells Fargo re­quired bor­row­ers to have com­pre­hen­sive and col­li­sion in­sur­ance. If they didn’t have com­pre­hen­sive cov­er­age, Wells would pur­chase it for the cus­tomer and charge them for it.

Wells ac­knowl­edged its sys­tems signed up cus­tomers who al­ready had in­sur­ance. Worse, roughly 20,000 cus­tomers were un­able to af­ford the car pay­ment plus the in­sur­ance that some did not re­al­ize had been added to what they owed, and that “may have con­trib­uted to a de­fault that led to their ve­hi­cle’s re­pos­ses­sion,” the bank said.

The dam­age may be even larger. The New York Times re­ported that as many as 800,000 cus­tomers may have been af­fected, of which 274,000 fell into de­fault be­cause they could not af­ford the pre­mi­ums and monthly pay­ment and 25,000 of them may have had their ve­hi­cles re­pos­sessed.

The prob­lems with the in­sur­ance pro­gram were found in July 2016, the bank said, and it was dis­con­tin­ued in Septem­ber of that year. The bank said it will start con­tact­ing af­fected cus­tomers in Au­gust and will reach out to the ma­jor credit bu­reaus to cor­rect cus­tomers’ credit his­to­ries. —AP

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