Wells agrees to settle auto loans class action lawsuit

title=

Wells Fargo and an insurance company it worked with have agreed to pay $432 million to settle a class action lawsuit related to consumer harms in its auto lending business.

PA

Wells Fargo and an insurance company it worked with have agreed to pay $432 million to settle a class action lawsuit brought by customers who say they had to pay premiums for car insurance they didn’t need.

The settlement was approved this week by a U.S. District Court judge in California.

In 2017, The New York Times published the results of an internal report which found that more than 800,000 people had to pay premiums for unnecessary insurance. The bank then initially acknowledged that up to 570,000 customers may have been affected by the practice and in some cases it may have contributed to vehicle repossessions.

Wells Fargo is based in San Francisco, but has its largest employment hub in the Charlotte area, with about 26,000 workers.

The car loan controversy was one of a series of issues the bank has faced since it was revealed in 2016 that bankers had opened millions of accounts without customers’ permission to meet sales targets. under pressure.

Former Wells CEO Tim Sloan resigned this year amid scrutiny of issues raised by lawmakers and regulators. In September, the company named Charles Scharf as its third permanent executive in three years.

According to the Times report, the affected auto loan customers were unaware that the bank was applying a specific type of National General Insurance auto insurance to their accounts. They were then charged for insurance premiums in addition to loan repayments.

In a statement provided to the Observer, spokeswoman Natalie Brown said the bank was happy with the deal.

“This is an important step in making things right for customers affected by (the insurance program),” she said.

A lawsuit is forming

Following the 2017 auto loan revelations, Wells issued an apology to customers and agreed to provide approximately $80 million in compensation to those affected by the auto policies.

But it was “woefully inadequate,” said Paul Novak, managing attorney in the Detroit office of the law firm Weitz & Luxenberg, who worked with the plaintiffs on the case.

The class action lawsuit was filed in 2017 by an Indianapolis man who said he was harmed by the practices after buying a vehicle with a Wells Fargo loan in February 2016.

The lawsuit accused Wells Fargo, along with auto insurers, of engaging “in a scheme to extort millions of dollars from more than 800,000 unsuspecting Wells Fargo customers.”

Brown said the $80 million originally agreed for the cleanup has increased since 2017 and the company expects the estimates to be updated as the cleanup program continues. She said those who are not part of the class action will still receive the same remedies.

Other scandals

The institution has struggled to repair its image since the 2016 fake account scandal as it exposed damage to consumers in other areas, including the auto loan controversy, such as foreign exchange and debt management. heritage.

Last year, the company apologized for an error in which the bank refused or failed to offer around 870 mortgage modifications to consumers over an eight-year period. The error led to approximately 545 customers losing their homes due to foreclosure.

During a March Congressional hearing, U.S. Representative Maxine Waters accused the bank of engaging in a “gross pattern of consumer abuse.” Due to the injury, the Federal Reserve last year imposed an unprecedented cap on the company’s growth, which is still in place.

Scharf said his first priority as chief executive was to resolve regulatory issues.

This story was originally published November 22, 2019 6:10 p.m.

Charlotte Observer Related Stories

Danielle Chemtob covers economic growth and development for the Observer. She is a 2018 graduate of UNC-Chapel Hill School of Journalism and a California transplant.