Regulator’s report criticizes Wells Fargo’s auto insurance compensation
$80 million may not be enough to cover those affected.
An independent government regulator has called out American bank Wells Fargo for its deceptive practices and failure to provide sufficient compensation relief to customers affected by the recent auto insurance scandal.
In July, Wells Fargo admitted that it sold auto insurance to hundreds of thousands of its customers who didn’t need or want coverage, leading to missed payments and repossessions. US$80 million was paid in compensation. Of this, roughly $64 million in cash and $16 million in account adjustments was handed back to customers.
However, a confidential preliminary report filed by the Office of the Comptroller of the Currency and obtained by The New York Times found that the bank had “most likely underestimated” the cost of reimbursing those affected.
The Office of the Comptroller is an independent bureau within the United States Department of the Treasury. An internal company analysis found that over 800,000 customers who took out car loans from Wells Fargo were charged for car insurance that they did not want or need, mostly because they already had coverage in place. 274,000 Wells Fargo customers fell behind on their loans and almost 25,000 vehicles were improperly repossessed.
The comptroller’s office said that the $80 million set aside for customer compensation may not be enough to cover additional victims that may be identified, because Wells Fargo’s analysis excluded years of imposed coverage.
The preliminary report may encourage the bank to review sales, compliance and risk practices company-wide. The report requires that the bank ensure all of its businesses have systems in place to prevent similar situations from happening.
In September 2016, Wells Fargo was fined $185 million by the Consumer Financial Protection Bureau (CFPB) and the Los Angeles City Attorney’s office for opening more than 2 million credit card and deposit accounts without customers’ permission. The bank reached a $145 million settlement with customers in this case.
Last Friday, the bank reportedly let go of four of its foreign exchange bankers, as a result of the scandal.
When determining your rates, insurers analyze more than just your driving record and ZIP code. Algorithms also crunch the claims and accident records of the make and model of car that you intend to insure.