Wells Fargo has been in the news quite a lot over the last few years. In April 2016 Wells Fargo agreed to pay $1.2 Billion for Improper Mortgage Lending Practices. In June 2016 Wells Fargo agreed to pay $185 million in settlements for Aggressive/Fraudulent Sales Practices after being sued by the Consumer Financial Protection Bureau. Then in June 2017, as part of a class action settlement, Wells Fargo agreed to pay $142 Million dollars for Creating Sham Credit Card and Bank Accounts causing damage to credit scores for consumers. The latest settlement of $80 Million is for Overcharging its Consumers for Auto Insurance.
Overcharging for Auto Insurance
The New York Times first reported that Wells Fargo was overcharging consumers for auto insurance. The article outlined that the newspaper had obtained records from Wells Fargo that showed roughly 800,000 people took out car loans with Wells Fargo. As part of the loan they were charged for auto insurance that they did not need. The report states as a result of the unnecessary car insurance charges approximately 274,000 consumers became delinquent and roughly 25,000 vehicles were wrongly repossessed. This practice occurred from 2006 until September 2016 when Wells Fargo would stopped the practice. The delinquency occurred when Wells Fargo added the insurance policy and charged the account without notifying the consumer of the added auto insurance policy monthly payment. Many states such as Arkansas, Michigan, Mississippi, Tennessee and Washington require a lender to notify the consumer when the lender takes out an insurance policy and adds the cost to the loan. Wells Fargo did not always notify the consumer before they took out the policy and charged the account.
While Wells Fargo, in a matter of days, agreed to voluntarily reimburse its customers the $80 Million it earned from the overcharging for the auto insurance; Wells Fargo has still not made consumers whole as the delinquencies caused by this practice impacted consumers credit reports and may have caused delinquencies on other loans when the consumer attempted to pay the higher amount to Wells Fargo.
Since these settlements and stories were made public, several key employees have left the bank, including CEO John Stumpf and Wells Fargo’s Board have sought return of bonuses and other money paid to both Stumpf and Carrie Tolstedt, the former head of the community bank unit. Time will tell whether Wells Fargo has really changed it lending practice and its culture of praying on consumers in order to make huge profits.