July 30, 2017
Wells Fargo Faces New Scandal in Auto Insurance Business
Ken Sweet READ TIME: 2 MIN.
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 20,000 people their cars.
The San Francisco-based bank 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," said Franklin Codel, the head of Wells Fargo Consumer Lending, 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 amends with customers, politicians and the public ever since.
In this case, Wells Fargo reviewed auto policies placed between 2012 and 2017. Like most auto loan companies, the bank 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 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.
