Wells Fargo and an insurance company it worked with have agreed to pay $432 million to settle a class-action lawsuit brought by customers who say they were charged premiums for auto insurance they did not need.
The settlement was given final approval by a U.S. District Court judge in California this week.
In 2017, The New York Times published the results of an internal report that found more than 800,000 people may have been charged premiums for the unnecessary insurance. The bank then initially acknowledged that as many as 570,000 customers may have been affected by the practice, and in some instances, it may have contributed to vehicle repossessions.
Wells Fargo is based in San Francisco, but has its largest employment hub in the Charlotte region, with about 26,000 workers.
The auto lending controversy was one of a series of troubles the bank has faced since it was revealed in 2016 that bankers had opened millions of accounts without customer permission to meet high-pressure sales goals.
Wells’ former CEO, Tim Sloan, resigned this year amid the scrutiny the problems prompted from lawmakers and regulators. In September, the company named Charles Scharf as its third permanent leader in three years.
According to The Times report, the impacted auto loan customers were unaware that the bank was applying a specific type of auto insurance from National General Insurance to their accounts. They were then charged for the insurance premiums in addition to the loan payments.
In a statement provided to the Observer, spokeswoman Natalie Brown said the bank is pleased with the agreement.
“It is an important step in making things right for customers impacted by (the insurance program),” she said.
A lawsuit forms
As a result of the 2017 auto lending revelations, Wells issued an apology to customers and agreed to provide around $80 million in remediation to those hurt by the auto policies.
But that was “woefully inadequate,” said Paul Novak, managing attorney of the Detroit office of law firm Weitz & Luxenberg, which worked with plaintiffs on the case.
The class-action suit was filed in 2017 by an Indianapolis man who said he was harmed by the practices after he purchased a vehicle with a Wells Fargo loan in February 2016.
The lawsuit accused Wells Fargo, along with auto insurance underwriters, of engaging “in a scheme to bilk millions of dollars from more than 800,000 unsuspecting Wells Fargo customers.”
Brown said the $80 million initially agreed to in remediation has increased since 2017, and that the company expects the estimates to be updated as the remediation program continues. She said those who are not a part of the class-action lawsuit will still receive the same remedies.
Other scandals
The institution has struggled to fix its image since the 2016 fake accounts scandal as it has disclosed consumer harm in other areas, including the auto lending controversy, such as foreign exchange and wealth management.
Last year, the company apologized for an error in which the bank denied or failed to offer about 870 mortgage modifications to consumers during an eight-year period. The mistake led to about 545 customers to lose their homes to foreclosure.
In a Congressional hearing in March, U.S. Rep. Maxine Waters accused the bank of engaging in an “egregious pattern of consumer abuses.” Because of the harm, the Federal Reserve imposed an unprecedented cap on the firm’s growth last year, which is still in place.
Scharf has said his first priority as chief executive is to address the regulatory issues.
Danielle Chemtob covers economic growth and development for the Observer. She’s a 2018 graduate of the journalism school at UNC-Chapel Hill and a California transplant.
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Wells Fargo, insurance company settle lawsuit over auto loan harms for $432 million - Charlotte Observer
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