Bank suit tar­gets car-loan in­surance

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - LAURA J. KELLER AND MAR­GARET CRONIN FISK

Wells Fargo & Co. cus­tomers ac­cused the bank in a law­suit of forc­ing them to pay for un­nec­es­sary auto in­surance that drove some of them so far into a fi­nan­cial spi­ral that their ve­hi­cles were re­pos­sessed.

The com­plaint comes af­ter a year of hand­wring­ing and in­ter­nal changes brought on by ear­lier wrong­do­ing at Wells Fargo. Bank work­ers opened up pos­si­bly 2.1 mil­lion check­ing and credit-card ac­counts with­out cus­tomers’ per­mis­sion over about half a decade, and the bank paid $185 mil­lion to reg­u­la­tors to set­tle.

Now the bank is ac­cused of bilk­ing mil­lions of dol­lars from “un­sus­pect­ing cus­tomers who were forced to pay for auto in­surance they did not need or want,” push­ing al­most 250,000 of them into delin­quency and re­sult­ing in al­most 25,000 ve­hi­cle re­pos­ses­sions, ac­cord­ing to a pro­posed class-ac­tion law­suit filed Sun­day in San Fran­cisco fed­eral court.

In­di­anapo­lis con­sumer Paul Han­cock claims in the law­suit that Wells Fargo re­ceived kick­backs from Na­tional Gen­eral Hold­ings

Corp., which isn’t named as a de­fen­dant, through shared com­mis­sions on the poli­cies.

re­ported that Wells Fargo stopped shar­ing in com­mis­sions from the in­surance sales in Fe­bru­ary 2013.

“The rev­e­la­tion of this lat­est breach of cus­tomer trust ap­pears to fit right into the Wells Fargo play­book of dirty deeds, and sadly comes as no sur­prise,” Roland Tel­lis, one of Han­cock’s lawyers, said last week when he an­nounced his firm was in­ves­ti­gat­ing the bank. Keller Rohrback LLP, the law firm that’s be­hind the class ac­tion over Wells Fargo’s re­tail-bank ac­counts scan­dal, also said it’s in­ves­ti­gat­ing the auto in­surance is­sue.

When cus­tomers took out Wells Fargo loans to pur­chase ve­hi­cles, the bank and the in­surance com­pany ei­ther didn’t check whether clients al­ready had cov­er­age or ig­nored the in­for­ma­tion, ac­cord­ing to the com­plaint. Col­lat­eral pro­tec­tion in­surance poli­cies were cre­ated for cus­tomers, and Wells Fargo then would add pre­mium charges to cus­tomers’ auto loan bills, of­ten with­out no­ti­fy­ing them, ac­cord­ing to the law­suit.

Wells Fargo last week said it may have pushed thou­sands of car buy­ers into loan de­faults and re­pos­ses­sions by charg­ing them for the un­wanted in­surance. The bank said an in­ter­nal re­view of its auto lend­ing found more than 500,000 clients may have un­wit­tingly paid for pro­tec­tion against ve­hi­cle loss or dam­age while mak­ing monthly loan pay­ments, even though many drivers al­ready had their own poli­cies. The firm said it may pay as much as $80 mil­lion to af­fected clients — with ex­tra money for as many as 20,000 who lost cars, “as an ex­pres­sion of our re­gret.”

The len­der is still strug­gling to over­come the fake-ac­counts scan­dal in its com­mu­nity bank and said last week that the divi­sion’s new leader is cut­ting about 70 se­nior ex­ec­u­tive jobs. The ac­counts scan­dal led to the ouster last year of Wells Fargo’s long time Chief Ex­ec­u­tive Of­fi­cer John Stumpf and has cost the bank at least $520 mil­lion in fines, re­me­di­a­tion, con­sul­tants and civil lit­i­ga­tion — in­clud­ing $142 mil­lion to cus­tomers who sued the bank over the ac­counts.

The bank said it was sorry “for any in­con­ve­nience” caused by the auto in­surance pro­gram. It’s in the process of “mak­ing things right,” Wells Fargo said in an emailed state­ment. The bank said it dis­con­tin­ued the in­surance pro­gram in Septem­ber 2016 af­ter find­ing er­rors.

A rep­re­sen­ta­tive of Na­tional Gen­eral had no im­me­di­ate com­ment.

Han­cock said Wells Fargo placed col­lat­eral pro­tec­tion in­surance on a ve­hi­cle he bought in Fe­bru­ary 2016, charg­ing him $598. Han­cock “re­peat­edly con­tacted Wells Fargo to in­form them that he had the re­quired in­surance through an auto in­surance pol­icy from All­state,” ac­cord­ing to the com­plaint.

Wells Fargo didn’t credit his ac­count for the im­proper charge or re­fund the money, he said. In­stead, Wells Fargo kept charg­ing him for the pol­icy and he was charged a late fee, Han­cock said.

Han­cock seeks resti­tu­tion, dis­gorge­ment of all prof­its and three times dam­ages in­curred by all plain­tiffs.

Wells Fargo last week said it would start send­ing let­ters and re­fund checks next month to cus­tomers with poli­cies placed from 2012 to 2017 that it de­ter­mines were harmed, and ex­pects the process will be com­plete by the end of the year. The len­der also promised to work with credit bu­reaus to amend cus­tomers’ credit records.

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