Wells Fargo admitted Thursday that it had improperly charged 570,000 borrowers for auto insurance they did not need or were not told about. The company said it would pay wronged customers $64 million in cash, and make $16 million worth of adjustments to accounts.
The company said it would begin contacting wronged customers in August with letters and checks.
Credit: Carrie Teegardin
Credit: Carrie Teegardin
The bank's announcement came after the New York Times exposed the bank's behavior after obtaining an internal report. That document said the insurance charges "pushed roughly 274,000 Wells Fargo customers into delinquency and resulted in almost 25,000 wrongful vehicle repossessions."
The charges came for policies from Collateral Protection Insurance. Auto lenders require borrowers to have insurance on vehicles they finance. Wells Fargo would add Collateral Protection Insurance if borrowers did not have coverage.
But in this case, the bank was improperly adding the insurance even when customers already had their own insurance. The bank debited the borrowers' bank accounts for the coverage, according to the New York Times story, which also said that members of the military on active duty were among those harmed.
“We take full responsibility for our failure to appropriately manage the CPI program and are extremely sorry for any harm this caused our customers, who expect and deserve better from us,” said Franklin Codel, head of Wells Fargo Consumer Lending, in a statement released by the bank. “Upon our discovery, we acted swiftly to discontinue the program and immediately develop a plan to make impacted customers whole.”
In addition to refunding customers, Wells Fargo said it would also work with credit bureaus "to correct customers’ credit records, if applicable," according to the company's statement.
