Wells Fargo admits it wrongly charged customers for car insurance
NEW YORK – Wells Fargo, its reputation still stained from having opened millions of unauthorized customer accounts, is now having to apologize for another breach of trust.
The bank announced late Thursday that it will pay $80 million to customers who the bank signed up and charged for auto insurance that they did not want or need. Wells Fargo said that roughly 570,000 customers were affected and will be getting refunds.
Like most auto loan companies, Wells Fargo (WFC) required borrowers to have comprehensive and collision insurance. If they didn't have comprehensive coverage, Wells would purchase it for the customer and charge them for it as part of what it called its collateral protection insurance, or CPI, program.
Wells admits its systems signed up customers who already had insurance and that some premiums "may have contributed to a default that led to their vehicle's repossession."
"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 consumer lending at Wells Fargo.
Nearly a year ago, Wells Fargo admitted its employees opened up to 2 million accounts for customers without getting their permission in order to meet sales targets. An internal review by the bank found that employees had opened bogus accounts dating back to 2002. The scandal eventually led to congressional investigations and the dismissal of CEO John Stumpf.
Wells Fargo shares fell $1.39, or 2.5 percent, to $53.32, in afternoon trading.
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