Wells Fargo plans to issue refunds to more than 570,000 auto loan customers who were charged for auto insurance without their knowledge. The refunds – totaling $80 million – will take place in August and will include $64 million in cash and $16 million in account adjustments.
Auto loan customers were required to carry insurance. Wells Fargo says that its loan contracts allowed insurance policies to be ordered if there was no evidence that customers had those policies. However, a five-year review of the bank’s policies revealed that close to 490,000 customers had auto insurance but were charged by the bank anyway (an average of $51 per customer).
Another 60,000 customers were not informed by Wells Fargo that the bank had obtained insurance for them. This lack of disclosure is a violation of state laws. An additional 20,000 customers may have had their vehicles repossessed because of the added cost of insurance (an average of $650 per customer). Those customers will get payments beyond the financial harm caused (an average of $800 per customer).
This is the latest in a string of problems for Wells Fargo. Last year the bank was fined $185 million by the Consumer Financial Protection Bureau for opening more than 2 million deposit and credit card accounts without their customers’ permission. Earlier in July, the bank reached a $145 million settlement in a class-action lawsuit filed by customers whose credit scores were damaged by that scandal.
Let us know! How does your dealership handle loan customers who don’t provide proof of insurance?