Wells Fargo to refund $80M to car loan clients
570,000 were hit with auto insurance they didn’t ask for
Wells Fargo will give refunds to more than 570,000 auto loan customers who also were charged for auto insurance without their knowledge.
The bank said in August it will begin sending letters and refund checks to customers, most of whom already had insurance of their own, and some who had their cars repossessed, in part, because of the practice. Wells Fargo will make $80 million in payments — $64 million in cash and $16 million in account adjustments — the bank said Thursday.
Auto loan customers were required to have insurance, and Wells Fargo says its contracts permitted a policy to be ordered if there was no evidence customers had done so. However, about 490,000 customers charged for the auto insurance already had coverage for some or all of their loan’s duration, according to a review of the bank’s policies from 2012 to 2017. Refunds for these customers will total $25 million.
This is just the latest predicament for one of the nation’s largest banks. In practices that echo this insurance process, Wells Fargo was fined $185 million in September 2016 by the Consumer Financial Protection Bureau and the Los Angeles City Attorney’s office for opening as many as 2.1 million deposit and credit-card accounts without customers’ permission.
This month, the bank reached a $145 million settlement in a class-action suit filed by customers whose credit scores were hurt by those practices.
After auto loan customers complained, Wells Fargo began a review of the insurance program in July 2016 and ended it two months later, it says.
“In the fall of last year, our CEO and our entire leadership team committed to build a better bank and be transparent about those efforts,” Franklin Codel, who heads Wells Fargo Consumer Lending, which includes the dealer services unit, said in a statement. “Our actions over the past year show we are acting on this commitment.”
Beyond the customers charged for insurance when they already had coverage, another 60,000 were not told about Wells Fargo’s obtaining insurance for them in violation of state laws. Refunds for this group will total about $39 million.
For 20,000 customers, the added cost of insurance procured by Wells Fargo could have led to repossession of their vehicle. These customers will get payments beyond the financial harm caused, Wells Fargo says, totaling $16 million.
Wells Fargo issued its statement after The New York Times reported more than 800,000 of the bank’s car loan customers were charged for unneeded auto insurance. That number of affected customers, which is higher than Wells Fargo’s figure announced Thursday, comes from an internal report for the bank prepared by consulting firm Oliver Wyman and obtained by the