Wells Fargo to compensate car loan customers compelled to buy auto insurance
Wells Fargo said on Thursday that it would compensate around 570,000 customers with car loans who were harmed by being compelled to buy auto insurance.
The bank estimated the total cost at around $80 million.
Auto-loan contracts require customers to have comprehensive insurance for potential harm, and the bank was permitted under the contracts to buy that coverage and pass on the cost if there was no evidence it had been purchased elsewhere, Wells Fargo noted in the statement on Thursday.
But it added that its “internal controls were inadequate,” with customers charged insurance premiums even if they were paying for their own vehicle insurance.
“We take total responsibility for our failure to appropriately manage the collateral protection insurance program and are enormously 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 the statement.
“Upon our discovery, we acted swiftly to discontinue the program and instantly develop a plan to make impacted customers entire,” he said.
The overcharging of customers for auto insurance was very first reported by the Fresh York Times on Thursday.
That article, citing a 60-page internal report ready by consulting hard Oliver Wyman, said that Wells Fargo required a much larger number of customers — more than 800,000 — who took out car loans to buy auto insurance they did not need.
The cost of the unnecessary insurance shoved around 274,000 customers into delinquency and resulted in almost 25,000 wrongful vehicle repossessions, the article said, citing the internal report.
The internal report examined insurance policies sold to Wells Fargo customers from the beginning of two thousand twelve through mid-2016, the article said, noting the practice began as early as two thousand six and continued through September of 2016.
Wells Fargo’s mea culpa over the improper auto insurance sales marked another black eye for the bank.
In September, Wells Fargo reached a $185 million settlement with regulators over creating what the bank then said could be as many as Two.1 million accounts in customer names without their permission.
Workers created the accounts to meet the bank’s aggressive sales quotas to enroll customers in numerous programs.
Since then, former CEO John Stumpf has left the bank and a handful of other executives have departed as well. Wells Fargo recently announced another settlement — this time $142 million to take care of a class-action lawsuit.
The Wells Fargo board recently determined to claw back more money from Stumpf and Carrie Tolstedt, the former head of the community bank unit head, where the scandal unfolded.
—CNBC’s Jeff Cox, Wilfred Frost and Dawn Giel contributed to this article.
Wells Fargo to compensate car loan customers coerced to buy auto insurance
Wells Fargo to compensate car loan customers coerced to buy auto insurance
Wells Fargo said on Thursday that it would compensate around 570,000 customers with car loans who were harmed by being compelled to buy auto insurance.
The bank estimated the total cost at around $80 million.
Auto-loan contracts require customers to have comprehensive insurance for potential harm, and the bank was permitted under the contracts to buy that coverage and pass on the cost if there was no evidence it had been purchased elsewhere, Wells Fargo noted in the statement on Thursday.
But it added that its “internal controls were inadequate,” with customers charged insurance premiums even if they were paying for their own vehicle insurance.
“We take utter responsibility for our failure to appropriately manage the collateral protection insurance program and are utterly 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 the statement.
“Upon our discovery, we acted swiftly to discontinue the program and instantly develop a plan to make impacted customers entire,” he said.
The overcharging of customers for auto insurance was very first reported by the Fresh York Times on Thursday.
That article, citing a 60-page internal report ready by consulting stiff Oliver Wyman, said that Wells Fargo required a much larger number of customers — more than 800,000 — who took out car loans to buy auto insurance they did not need.
The cost of the unnecessary insurance shoved around 274,000 customers into delinquency and resulted in almost 25,000 wrongful vehicle repossessions, the article said, citing the internal report.
The internal report examined insurance policies sold to Wells Fargo customers from the beginning of two thousand twelve through mid-2016, the article said, noting the practice began as early as two thousand six and continued through September of 2016.
Wells Fargo’s mea culpa over the improper auto insurance sales marked another black eye for the bank.
In September, Wells Fargo reached a $185 million settlement with regulators over creating what the bank then said could be as many as Two.1 million accounts in customer names without their permission.
Workers created the accounts to meet the bank’s aggressive sales quotas to enroll customers in numerous programs.
Since then, former CEO John Stumpf has left the bank and a handful of other executives have departed as well. Wells Fargo recently announced another settlement — this time $142 million to take care of a class-action lawsuit.
The Wells Fargo board recently determined to claw back more money from Stumpf and Carrie Tolstedt, the former head of the community bank unit head, where the scandal unfolded.
—CNBC’s Jeff Cox, Wilfred Frost and Dawn Giel contributed to this article.