Banking giant, Wells Fargo, recently announced they would remedy auto loans
made to customers who were financially harmed as a result of Collateral
Protection Insurance policies. Collateral Protection Insurance insures
any property which is offered as collateral for loans made by the bank.
CPI protects the interests of the lender, since the borrower typically
agrees to purchase and maintain full-coverage insurance, listing the bank
as the lienholder.
In the case of Wells Fargo, approximately 570,000 customers were identified
who had CPI policies issued between 2012 and 2017, and who may have been
charged CPI premiums even when they were paying their own vehicle insurance.
In other cases, CPI premiums charged to Wells Fargo customers could have
actually contributed to a default for the customer which led to repossession
of their vehicle.
Financial Remediation Being Sent to Harmed Wells Fargo Borrowers
As much as $64 million in cash remediation will be sent to the customers
identified as being harmed in the form of refund checks as well as $16
million in account adjustments. Franklin Codel, the head of Wells Fargo
Consumer Lending, wants customers to know that “…our entire leadership team committed to build a better bank and be transparent
about those efforts…”
The customers’ contracts for their auto loans require that comp and
collision insurance must be maintained from the beginning of the loan
through to the last payment. If neither the customer nor the insurance
company offers proof that the borrower has paid for such coverage, Wells
Fargo is legally allowed to purchase CPI on behalf of the customer. Unfortunately,
after a thorough review of the practice, Wells Fargo determined that both
the internal controls and the external vendor processes were simply inadequate
to protect borrowers.
Many customers ended up being charged CPI premiums despite the fact they
were already paying for their own full-coverage insurance in accordance
with the loan contract. Based on these findings, the Wells Fargo CPI program
was discontinued in September 2016. The remediation process is expected
to progress as follows:
- Nearly 500,000 Wells Fargo customers had properly purchased their own vehicle
insurance coverage, yet had been charged for CPI either for the entire
term of their loan, or for at least a part of the term. These customers
had the premiums and interest they paid for duplicate coverage refunded,
and will also receive refunds related to specific fees and some additional interest.
- About 60,000 customers in five states which have specific disclosure and
notification requirements failed to receive vendor disclosures as required
by law prior to having CPI insurance placed on their loan. These customers
will receive premiums, fees and interest, even if the CPI was required
because the borrower had no insurance on their own.
- For about 20,000 Wells Fargo borrowers, the CPI costs may have contributed
to default and subsequent repossession. These customers will receive compensation
for the loss of their vehicle, as well as payment above and beyond actual
financial harm as “an expression of our regret.” There will
be about $16 million in restitution for this group of borrowers.
Wells Fargo has also vowed to work with the credit bureaus to correct any
customer credit report which was harmed as a result of the CPI. The bank
executives claim they have also taken additional steps to make sure third-party
vendors have the required oversight to protect customers.
Wells Fargo has been plagued over the past few years with the discovery
of practices which were definitely not in the best interests of its customers.
In one particularly egregious example, Wells Fargo employees were opening
accounts for customers without the customer’s knowledge or approval,
in an effort to set up the most accounts. In another, Wells Fargo was
caught re-sequencing ATM transactions from high to low (rather than as
they come in) to increase overdraft revenue. In order to improve its rather
tarnished reputation, Wells Fargo has been working to earn back the trust
of customers—this latest remediation being one example.
To learn more about your legal options or to schedule a free consultation
call the Philadelphia consumer protection lawyers at Golomb & Honik today at
1-800-355-3300 or 1-215-985-9177 or fill out our confidential
The national consumer protection lawyers at Golomb & Honik have successfully
represented individuals in Philadelphia, Pennsylvania, New Jersey, and
throughout the United States