Class Action Accuses Wells Fargo of Charging Auto Loan Customers for Unneeded Car Insurance

Public Health Watchdog Breaking News
Public Health Watchdog Breaking News

In a class action lawsuit filed on July 30, 2017 in federal court in San Francisco, auto loan borrowers allege that Wells Fargo bank charged loan customers for auto insurance they did not need.

According to an internal report prepared for Wells Fargo, more than 800,000 Wells Fargo car loan customers had charges imposed for unneeded collision damage insurance, according to the New York Times. Some customers are still paying for the unneeded insurance.

The Times obtained a copy of the 60-page report, which shows that the practice resulted in about 274,000 Wells Fargo customers in delinquency on their loans and nearly 25,000 vehicles wrongly repossessed. Active duty military service members were among those harmed, according to the Times.

Wells Fargo is still dealing with a scandal in which employees created millions of bank accounts and credit card accounts that customers had not requested. These accounts earned unwarranted fees for Wells Fargo and allowed  employees to boost their sales figures and make more money. Customers, however, incurred late fees and overdraft charges because money was diverted from their original accounts into accounts they were not aware of and had not applied for.

In 2016, Wells Fargo’s chief executive was forced out and the company was hit with millions of dollars in fines. In addition, Wells Fargo is accused of improper adjustments to home loans of customers who were in bankruptcy, though the company denies those charges.

The attorneys at national law firm Parker Waichman LLP are investigating improper consumer lending practices at Wells Fargo and can answer consumer questions about possible lawsuits.

Wells Fargo Confirms Improper Insurance Charges

Wells Fargo officials confirmed the improper auto insurance practices and said the bank was determined to make customers whole, the Times reports. Franklin R. Codel, 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.” Codel noted that Wells Fargo itself had identified the improper practice.

The consulting firm Oliver Wyman prepared the report for Wells Fargo. Oliver Wyman looked at insurance policies sold to Wells Fargo customers between January 2012 and July 2016. The bank required this insurance, which cost consumers more than the insurance many of them already had, the Times reports. The practice continued until the end of September.

National General Insurance, which underwrote the policies for Wells Fargo, declined to comment.

Many car loan customers fell into delinquency because of the way the bank charged for the insurance. If, for example, a customer arranged to have the loan payment automatically deducted from a bank account but was not aware of the additional charge for insurance, the customer’s bank account could be overdrawn when Wells Fargo added the coverage. The customer could then face overdraft fees and late fees if the bank did not make the loan payment. Some customers asked Wells Fargo to cancel the policies and refund the charges because they already carried adequate collision protection on their auto insurance.

The report estimated that the bank owed $73 million to wronged customers.

Though insurance regulations in many states required Wells Fargo to notify customers of the insurance before it was imposed, the bank did not always do so, according to the report. Almost 100,000 policies in Arkansas, Michigan, Mississippi, Tennessee and Washington violated the disclosure requirements, the Times reports.

Wells Fargo took issue with some of the numbers in the report. Bank spokeswoman Jennifer A. Temple said the bank found that only 570,000 customers may qualify for a refund and that just 60,000 customers in the states mentioned above had not received complete disclosures before the insurance coverage was applied. Well Fargo estimates only 20,000 wrongful vehicle repossessions, not the 25,000 in the report.

The report says Wells Fargo auto loan customers suffered financial damages beyond the costs of the unnecessary insurance. The harm also included vehicle repossession costs, bank late fees, charges for insufficient funds and damage to consumers’ credit ratings, which, in turn, could affect their ability to obtain loans or credit cards.

Mortgage lenders often impose insurance on borrowers to protect the mortgaged property but such “lender-placed insurance” on auto loans is not as common. Representatives of Bank of America, Citibank and JPMorgan Chase told the Times they do not offer the policies, though some smaller banks do.

Legal Help for Those Harmed by Wells Fargo Lending Practices

If you or someone you know has been unfairly charged by Wells Fargo for collision insurance in connection with an auto loan, the attorneys at Parker Waichman can advise you about your legal options. To contact the firm for a free, no obligation case evaluation, fill out the online contact form or call 1-800-YOURLAWYER (1-800-968-7529).