Wells Fargo Faces Fraud Charges after Auto Insurance Scandal
Aug 9th, 2017 @ 8:48 PM by Amber Nelson
Wells Fargo has found itself embroiled in yet another scandal, one that could potentially lead to hundreds of millions of dollars in legal losses.
The New York Times exposed an internal Wells Fargo report that reported the bank had charged more than 800,000 of its auto loan customers for insurance they did not need or want. That action has resulted in the loan default of 274,000 car loan borrowers as well as the wrongful repossession of 25,000 vehicles.
The bank has stated that it stopped all such charges last September after receiving “concerns” from customers. Wells Fargo has said that plans to refund roughly $80 million to 570,000 involved borrowers starting in August.
“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,” said Franklin R. Codel, the head of consumer lending at Wells Fargo. “We self-identified this issue, and we made the right business decisions to end the placement of the product.”
The refunds are not enough for some customers. A lawsuit led by affected borrower Paul Hancock brings charges of fraud and racketeering against the U.S.’ third-largest bank. Wells Fargo could stand to lose upwards of $100 million, according to Roland Tellis, a lawyer working on behalf of the plaintiffs.
“Refunds don’t address the fraud or inflated premiums, the delinquency charges, and the late fees,” Tellis said. “It will be up to a jury or court to decide the appropriate remedy.”
This latest scandal comes on the heels of a discovery last year that bank employees had created 2.1 million new accounts without permission from the customers in order to meet sales goals. Consequently, Wells Fargo is facing a $142 million class action settlement, in addition to $185 million in federal regulatory fines.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.