Wells Fargo & Co woke up Thursday morning staring another major scandal in the face, this time over revelations that it enrolled hundreds of thousands of its auto-loan customers in car insurance policies without their consent and then charged them for the unneeded coverage.
On July 27, The New York Times reported that the bank engaged in its auto insurance scam starting in 2012 until July of last year, roping in at least 800,000 of its auto-loan borrowers. The audacity of Wells Fargo’s insurance scheme is further compounded by the bank’s admission that it attempted to keep the scandal under wraps until it could reimburse customers who were wrongfully charged for the insurance.
According to Reuters, Wells Fargo quickly suspended the auto insurance program a year ago when its auto lending division was flooded with complaints. The bank then set about planning to conceal public disclosure until it could contact affected customers and compensate them.
Wells Fargo came clean Thursday evening, hours after The New York Times broke the story that the bank forced unneeded insurance on its auto loan borrowers.
According to The New York Times, “The expense of the unneeded insurance, which covered collision damage, pushed roughly 274,000 Wells Fargo customers into delinquency and resulted in almost 25,000 wrongful vehicle repossessions.” Several of those harmed by the sham included military service members on active duty, The New York Times reported.
Wells Fargo plans to return $80 million to 570,000 customers who qualify for a refund, but the actual sum the scandal will cost the company is bound to be multiples of that amount given lawsuits from customers who were harmed and other customer remediation, not to mention any blows to its corporate image the newest scandal will deal.
Not even a year ago Wells Fargo paid $190 million to settle another customer fraud case. That scandal, driven by the bank’s aggressive sales goals, involved the bank opening at least 2.1 million unauthorized deposit and credit card accounts in its customers’ names, then charging them fees for those sham accounts.
Last year, Wells Fargo also agreed to pay $1.2 billion to settle accusations of unlawful mortgage lending practices that put U.S. taxpayers on the hook bad mortgages.
According to Reuters, the Consumer Financial Protection Bureau (CFPB) has received 1,826 complaints about Wells Fargo vehicle loans or leases. Many of the customers affected by the bank’s auto insurance scam said they tried repeatedly and unsuccessfully to have to insurance charges removed.