Wells Fargo to Refund $80 Million of Unnecessary Car Insurance It Forced Onto Customers
Wells Fargo says it will reimburse roughly $80 million to customers erroneously charged for auto collateral protection insurance policies. Customers will be remediated after roughly 800,000 customers were essentially forced to purchase unnecessary auto insurance, despite many of them already having active policies.
The banking and financial services firm reviewed policies started between 2012 and 2017 and identified approximately 570,000 customers who could have been negatively impacted. It plans to issue refunds and other payments as compensation, especially to those who defaulted on their auto loans as a result of being overcharged.
“In the fall of last year, our CEO and our entire leadership team committed to build a better bank and be transparent about those efforts,” said Franklin Codel, head of Wells Fargo’s consumer lending program, in a statement. “Our actions over the past year show we are acting on this commitment.”
The New York Times suggests the unnecessary insurance forced roughly 274,000 customers into delinquency and resulted in almost 25,000 wrongful vehicle repossessions, citing a 60-page report from consulting firm Oliver Wyman.
Wells Fargo has been under heavy pressure to put its best foot forward for about a year. In September, authorities announced branch staff may have opened 2.1 million unauthorized client accounts to meet the bank’s aggressive sales quotas. While over 5,300 employees were fired for improper sales tactics over five years, the company neglected to change the policies or management that created the problem until the matter became public knowledge in 2016.
The recent auto insurance scandal is a reminder that Wells Fargo still has a long way to go if it wants to improve its image — a common problem among banks. Other financial institutions have been caught tacking similar policies onto auto loans in recent years, including numerous British banks outed during the 2012 Libor scandal.
“We take full responsibility for our failure to appropriately manage the CPI program and are extremely sorry for any harm this caused our customers, who expect and deserve better from us,” Codel said. “Upon our discovery, we acted swiftly to discontinue the program and immediately develop a plan to make impacted customers whole.”
[Image: Mike Mozart/ Flickr ( CC BY 2.0)]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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Fargo go Too Far... again.
This is why I do all my financial business with two local credit unions. One for loans, the other for savings. Pretty soon, I won't even need the one for loans anymore. Everything is insured up to $250k, just like any "real bank," and they know me by name.