Wells Fargo to re­fund $80M to car loan clients

570,000 were hit with auto in­sur­ance they didn’t ask for

USA TODAY Weekend Extra - - MONEY - Mike Snider @mikesnider USA TO­DAY

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

THE MOT­LEY FOOL

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.