Less than a week after a report alleged, and Wells Fargo admitted, to charging its auto loan customers for unnecessary and unwanted insurance, the bank has been subpoenaed by New York state banking and insurance regulators over the matter.
Reuters reports that the New York Department of Financial Services sent subpoenas to two of Wells Fargo’s banking units today in order to determine just how long the bank was aware of the unwanted insurance charges and the steps it has taken to resolve the issues.
The NYDFS subpoenas — sent to Wells and its insurance division — also requested loan contracts between the bank and New York borrowers, as well as agreements between the financial institution, auto dealers, and insurers.
The subpoena gave Wells Fargo until Aug. 22 to provide NYDFS with requested information. National General Insurance, the underwriter of the Wells Fargo’s policies in question, was also subpoenaed by NYDFS.
Consumerist has reached out to NYDFS for copies of the subpoenas and Wells Fargo for comment on the requests. We’ll update this post if we hear back.
The Alleged Scheme
For those unfamiliar, The New York Times broke news of the 60-page report that alleged that Wells Fargo charged more than 800,000 borrowers for unwanted or unneeded Collateral Protection Insurance, eventually leading to the repossession of more than 25,000 vehicles.
The insurance, which the bank required on auto loans beginning in 2006, was automatically added to customers’ tabs through Wells Fargo’s Dealer Services unit.
When a customer came to Wells Fargo for an auto loan their information was sent to National General. While the company was supposed to check to see if the customer already had insurance, that didn’t always happen, the report states.
Instead, a new insurance policy — often more expensive than the auto insurance customers had already acquired — would be added to the borrower’s account.
Of those pushed into the coverage, the report notes that 274,000 Wells Fargo customers were unable to pay for the insurance, eventually entering delinquency.
The delinquencies and repossessions were a consequence of the way Wells Fargo charged for the insurance, the report states. In some cases, customers who agreed to have their monthly loan payments deducted from their bank account automatically weren’t notified that the insurance payment would be added to that amount. As a result, some accounts could become overdrawn.
Making It Right
Wells Fargo admitted last week that it was aware of the issue, and had been for nearly a year. The company said that it initiated a review of the CPI program and related third-party vendor practices back in July 2016, discontinuing the CPI program in Sept. 2016.
However, it had not addressed the issue publicly until last week. At that point, Wells Fargo said it would refund customers who were financially harmed by CPI policies issued between 2012 and 2017.
“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,” Franklin Codel, head of Wells Fargo Consumer Lending, said in a statement.
Wells Fargo notes that while it has been providing CPI-related refunds to some customers, beginning next month it will send letters and refunds checks to customers who are due additional payments.
The bank said it identified approximately 570,000 customers who may have been impacted by the scheme. In all, approximately $64 million in cash remediation will be sent to customers in the coming months, along with $16 million of account adjustments, for a total of approximately $80 million in remediation.