Wells probed by N.Y. reg­u­la­tor

The probe will fo­cus on re­ports that the bank forced bor­row­ers to take auto in­sur­ance they didn’t need.

Los Angeles Times - - BUSINESS - By James Ru­fus Koren james.koren@la­times.com

The in­ves­ti­ga­tion will fo­cus on re­ports that the bank forced bor­row­ers to take auto in­sur­ance they didn’t need.

New York’s state in­sur­ance reg­u­la­tor is in­ves­ti­gat­ing last week’s rev­e­la­tion that Wells Fargo & Co. forced auto in­sur­ance poli­cies on bor­row­ers who didn’t need them — a mat­ter that’s also draw­ing at­ten­tion from Democrats on Capi­tol Hill.

The San Fran­cisco bank ac­knowl­edged it charged 570,000 auto-loan bor­row­ers for the un­nec­es­sary in­sur­ance. Now, the New York Depart­ment of Fi­nan­cial Ser­vices has sub­poe­naed records from Wells Fargo and its in­sur­ance provider, Na­tional Gen­eral In­sur­ance Co., over those poli­cies.

The depart­ment does not reg­u­late Wells Fargo, but does over­see Na­tional Gen­eral’s op­er­a­tions in the state. A depart­ment spokesman con­firmed sub­poe­nas were served late Tues­day but other­wise de­clined to com­ment. Reuters re­ported the move early Wed­nes­day.

Rep­re­sen­ta­tives for Wells Fargo and Na­tional Gen­eral did not re­spond to re­quests for com­ment.

The poli­cies, called col­lat­eral pro­tec­tion in­sur­ance, are only sup­posed to be is­sued when auto-loan bor­row­ers have not bought in­sur­ance of their own. In some cases, the bank ad­mit­ted it did prop­erly no­tify cus­tomers about the poli­cies. And in about 20,000 cases, the added cost of the in­sur­ance led bor­row­ers to de­fault and have their cars re­pos­sessed.

The bank said it would pay $80 mil­lion in re­funds and resti­tu­tion to harmed cus­tomers. The bank said it iden­ti­fied the issue it­self last year and stopped the prac­tice in Septem­ber. A day be­fore the bank an­nounced its re­me­di­a­tion plans, the New York Times re­ported on the un­needed in­sur­ance poli­cies, cit­ing a re­port pre­pared for the bank by a con­sult­ing firm.

Al­ready, con­sumer law­suits seek­ing class-action sta­tus have been filed against the bank. The New York fi­nan­cial ser­vices depart­ment is the first gov­ern­ment agency to pub­licly look into the mat­ter, though it may not be the last.

Last year, af­ter Wells Fargo reached a $185-mil­lion set­tle­ment with fed­eral reg­u­la­tors and the city and county of Los An­ge­les over its cre­ation of mil­lions of unau­tho­rized check­ing, sav­ings and credit card ac­counts, other gov­ern­ment agen­cies an­nounced their own in­ves­ti­ga­tions into the bank’s prac­tices.

The Cal­i­for­nia Depart­ment of In­sur­ance last year also opened an in­ves­ti­ga­tion into al­le­ga­tions that Wells Fargo had signed up cus­tomers for Pru­den­tial life in­sur­ance poli­cies with­out their con­sent.

Spokes­woman Nancy Kin­caid said Tues­day the depart­ment is “look­ing into a num­ber of al­le­ga­tions against Wells Fargo,” though she de­clined to com­ment on whether the auto-in­sur­ance poli­cies were among them.

As with the unau­tho­rized ac­counts scan­dal, law­mak­ers on Capi­tol Hill are get­ting in­volved.

Demo­cratic mem­bers of the House and Se­nate bank­ing com­mit­tees sent let­ters Tues­day to their re­spec­tive com­mit­tee chair­men, ask­ing for pub­lic hear­ings with tes­ti­mony from Wells Fargo Chief Ex­ec­u­tive Tim Sloan and Chair­man Stephen Sanger.

Democrats wrote that they wanted to in­quire about sev­eral is­sues, in­clud­ing the in­sur­ance mat­ter and other al­le­ga­tions that have sur­faced in the 11 months since the bank reached its $185-mil­lion reg­u­la­tory set­tle­ment.

“Many Com­mit­tee mem­bers have sought ad­di­tional in­for­ma­tion from Wells Fargo about th­ese de­vel­op­ments, with vary­ing de­grees of suc­cess,” the let­ter stated. “A hearing would give mem­bers the op­por­tu­nity to hear di­rectly from the bank’s top lead­er­ship about th­ese de­vel­op­ments.”

Com­mit­tee staff did not re­spond to a re­quest for com­ment.

The re­quests for hear­ings come as Democrats also seek to de­rail Repub­li­can plans to ease fi­nan­cial reg­u­la­tions and de­fang the Con­sumer Fi­nan­cial Pro­tec­tion Bu­reau.

Democrats have held up Wells Fargo as an ex­am­ple of why strict fi­nan­cial reg­u­la­tions and con­sumer pro­tec­tions should be kept in place.

In par­tic­u­lar, they have used the bank’s prac­tice of push­ing con­sumer dis­putes out of court and into pri­vate ar­bi­tra­tion as an ex­am­ple of why a new rule pro­posed by the Con­sumer Fi­nan­cial Pro­tec­tion Bu­reau — and staunchly op­posed by Repub­li­cans and a key Trump ap­pointee — should be al­lowed to stand.

In a party-line vote, House Repub­li­cans voted last week to scrap the rule be­fore it takes ef­fect. The Se­nate has yet to vote on the mea­sure.

Fred­eric J Brown AFP/Getty Im­ages

LAST WEEK Wells Fargo ac­knowl­edged it charged 570,000 auto-loan bor­row­ers for in­sur­ance poli­cies that they didn’t need, a mat­ter that’s draw­ing at­ten­tion from reg­u­la­tors and Democrats on Capi­tol Hill.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.