NEW YORK – Scandal-plagued Wells Fargo is back in hot water for signing customers up for products that they didn’t need or want. This time it’s auto insurance, and the bank says it may have cost about 20,000 people their cars.
San Francisco-based Wells Fargo acknowledged late Thursday that it enrolled roughly 570,000 auto loan borrowers for what’s known as collateral production insurance on their vehicles when the customers already had appropriate insurance. It will pay $80 million in refunds and account adjustments to those people.
“We take full responsibility for our failure … and are extremely sorry for any harm this caused our customers, who expect and deserve better from us,” Franklin Codel, the head of Wells Fargo Consumer Lending, said in a statement.
If the situation seems familiar, it is. Nearly a year ago, Wells Fargo admitted that its employees opened up to 2 million accounts for customers without getting their permission in order to meet overly aggressive sales goals. The bank paid $180 million in fines and penalties and recently reached a settlement to pay an additional $142 million to customers through a class-action lawsuit.
That scandal cost then-CEO John Stumpf his job, and the bank’s once-sterling industry reputation was in tatters. The bank’s new management has been trying to make amends with customers, politicians and the public ever since.
Politicians from both parties were angry with Wells Fargo when the scandal broke last year, and a couple high-profile Democrats were quick to turn up the heat again.
“The constant drip drop of fraudulent activities coming out of Wells Fargo is absolutely outrageous,” said Rep. Maxine Waters of California, the top-ranking Democrat on the House Financial Services Committee. Sen. Elizabeth Warren of Massachusetts called for the Federal Reserve to remove Wells’ board of directors.
This is not the first time Wells Fargo’s auto lending business has come under scrutiny. The bank reached a $4 million settlement with the Justice Department in September for illegally repossessing vehicles from servicemen and women.
In this case, the bank reviewed auto policies placed between 2012 and 2017. Like most auto loan companies, Wells Fargo required borrowers to have comprehensive and collision insurance. If they didn’t have comprehensive coverage, Wells would purchase it for the customer and charge them for it.
Wells acknowledged its systems signed up customers who already had insurance. Worse, roughly 20,000 customers were unable to afford the car payment plus the insurance that some did not realize had been added to what they owed, and that “may have contributed to a default that led to their vehicle’s repossession,” the bank said.
The damage may be even larger. The New York Times reported that as many as 800,000 customers may have been affected, of which 274,000 fell into default because they could not afford the premiums and monthly payment and 25,000 of them may have had their vehicles repossessed.
The problems with the insurance program were found in July 2016, the bank said, and it was discontinued in September of that year. The bank said it will start contacting affected customers in August and will reach out to the major credit bureaus to correct customers’ credit histories.
Subscribe to the Coronavirus newsletter
Get the day’s latest Coronavirus news delivered to your inbox by subscribing to our newsletter.