Auto insurance sales scandal hits embattled Wells Fargo
Revelation threatens to undermine the bank’s 10-month effort to restore its image
Wells Fargo & Co’s campaign to rebuild customer and shareholder trust just hit another bump, as the bank said it may have pushed thousands of car buyers into loan defaults and repossessions by charging them for unwanted insurance.
An internal review of the bank’s 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, Wells Fargo said in a statement late Thursday. The firm said it may pay as much as $80 million (Dh294 million) to affected clients — with extra money for as many as 20,000 who lost cars, “as an expression of our regret”.
The revelation threatens to undermine the bank’s 10-month effort to restore its Unnecessary or undisclosed insurance attached to loans has caused scandals at other major banks. British lenders for years sold payment protection insurance on their consumer loans that customers didn’t want or need, and since 2011 have set aside more than $40 billion (Dh147 billion) for the cost of reimbursing them. The bank has been trying to move past the account scandal that erupted publicly in September when it paid $185 million in fines. In that case, Wells Fargo initially faulted low-level staff, saying it had fired more than 5,300 employees over five years as it sought to stamp out their abuses. image after authorities announced last year that branch workers may have opened millions of unauthorised accounts for customers. For shareholders, Thursday’s disclosure also landed without any warning, even after that earlier debacle sent the stock tumbling and prompted congressional hearings and a leadership shake-up. Wells Fargo said it began reviewing the insurance issue about 12 months ago after hearing from clients.
“Upon our discovery, we acted swiftly to discontinue the program and immediately develop a plan to make impacted customers whole,” Franklin Codel, the bank’s head of consumer lending, said in the statement. The bank’s leaders “are extremely sorry for any harm this caused our customers, who expect and deserve better from us,” he said.