Mon, Jul 31, 2017
Last week, Wells Fargo admitted to charging over 800,000 customers that held auto loans for auto insurance that they did not need. According to an internal report now shared publicly by the New York Times, some customers are still paying for the insurance. Late last week, the bank said it would pay back approximately $80 million to customers who had been wrongly charged. That amount includes $64 million in cash and $16 million in account adjustments.
The charges made to these auto-loan customers pushed nearly 274,000 of them into delinquency with the bank and lead to almost 20,000 wrongful vehicle repossessions, according to the 60-page report. The New York Times reported that customers hurt by this practice included active duty military service members, which could mean violations of the Military Lending Act.
Wells Fargo’s admissions to these charges and vehicle repossessions follow trouble from 2016, when Wells Fargo received $185-million dollar fine after it was discovered its employees had created some two-million bogus credit card and other accounts for bank customers as they struggled to meet cross-sales goals required by the bank.
Wells Fargo officials confirmed to The New York Times that the improper insurance practices took place and said the bank was determined to make customers whole. In a statement to the Times, the bank’s head of consumer lending, said, “We have a huge responsibility and fell short of our ideals for managing and providing oversight of the third-party vendor and our own operations. We self-identified this issue, and we made the right business decisions to end the placement of the product.”
The Times explained that for borrowers, delinquencies arose quickly because of the way the bank charged for the insurance. “Say, for example, that a customer agreed to a monthly payment of $275 in principal and interest on her car loan, and arranged for the amount to be deducted from her bank account automatically,” the Times said. “If she were not advised about the insurance and it increased her monthly payment to, say, $325, her account could become overdrawn as soon as Wells Fargo added the coverage.”