Wells Fargo & Co. says it charged hundreds of thousands of auto-loan customers for insurance they did not ask for or need — in some cases causing those customers’ cars to be repossessed — and that it’s taking steps now to try to make things right.
After reviewing records from 2012 through 2017, Wells Fargo identified about 570,000 customers who may have been wrongly pushed into these insurance policies and will give them “refunds and other payments as compensation,” the San Francisco bank said in a news release late Thursday.
Wells Fargo made its announcement shortly after The New York Times published an article, based on a report commissioned by the bank, that first reported the problem and said more than 800,000 customers may have been affected.
That report was prepared months ago by a consulting firm at the bank’s request. The bank continued its internal review and concluded that a smaller number of customers were affected and would qualify for refunds.
The issue centers on collateral protection insurance policies, which are similar to auto insurance policies commonly taken out by vehicle owners to cover costs of damage to their own vehicles. Wells Fargo and other lenders often require that auto-loan customers have such policies, and if the customers can’t prove they do, the lenders often will buy a policy on their behalf and pass along the cost.
In this case, though, Wells Fargo improperly bought such policies on behalf of customers who already had their own insurance, and sometimes failed to properly notify those customers that it was doing so.
“We take full responsibility for our failure to appropriately manage the [insurance] program and are extremely sorry for any harm this caused our customers, who expect and deserve better from us,” Franklin Codel, head of Wells Fargo Consumer Lending, said in a statement. “Upon our discovery, we acted swiftly to discontinue the program and immediately develop a plan to make impacted customers whole.”
The company estimated that $64 million of cash remediation will be sent to customers, along with $16 million in account adjustments. It said it will also work to correct customers’ credit records.
Wells Fargo was already attempting to regain the public’s trust after a scandal over unauthorized accounts. In that scandal, Wells Fargo employees — trying to meet onerous sales quotas set by managers and executives — created as many as 3.5 million checking, savings and other accounts in customers’ names without those customers’ knowledge or consent. The bank’s practices were first uncovered by a 2013 Los Angeles Times investigation.
It’s also dealing with fallout from a lawsuit filed this month alleging that the bank hit customers with fees for delays in processing mortgage applications.
Wells Fargo said it began a review of the insurance policies in July of last year and stopped issuing such policies in September. It estimated that the process of paying back customers will be complete by the end of this year.