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Wells Fargo’s New Screw-Up Cost Customers $73M for Unneeded Car Insurance
After an announcement that probably surprised no one at all, Wells Fargo scrapped a business practice that charged auto loan customers for collision insurance they didn’t need.
This policy affected 800,000 customers, sent 274,000 of them into delinquency and led to 25,000 unnecessary auto repossessions, according to a report requested by bank executives obtained by The New York Times.
According to the report, Wells Fargo should have notified customers before charging them for the insurance, but that didn’t happen. Once customers noticed the charges and proved they had other insurance, Wells Fargo should have reversed the past charges and stopped any future payments.
But complaints filed with the Consumer Financial Protection Bureau showed that some customers continued to be charged even after notifying Wells Fargo of the mistake, The New York Times said.
These insurance policies could cause borrowers’ monthly payments to increase significantly without warning. For those who had their payments set to draft automatically, this unexpected increase could cause an overdraft and additional fees, potentially resulting in other financial issues.
Wells Fargo estimates this added insurance cost customers $73 million, but the bank is “determined to make customers whole.” The New York Times did not detail how the bank plans to do that.
Although Wells Fargo spokeswoman Jennifer A. Temple disputed some of the bank’s own numbers, she said the bank takes “full responsibility for these errors.”
The practice started as early as 2006 and ran through the end of September 2016.
Wells Fargo Is Having a Very Rough Year
Earlier this year, Well Fargo agreed to pay a $110 million settlement after a class-action lawsuit.
The lawsuit came after bank employees, following directives that went all the way up to the CEO, opened multiple unauthorized accounts in customers’ names.
This scandal led to the removal of Wells Fargo CEO John Strumpf and the firing of 5,300 employees.
Wells Fargo is also accused of making improper changes to the terms of home loan agreements of customers who were in bankruptcy. The bank denies this accusation.
Desiree Stennett (@desi_stennett) is a staff writer at The Penny Hoarder.