Wells Fargo halts auto loan processing for 1,100 car dealerships

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  • Economic uncertainty from the coronavirus pandemic has forced Wells Fargo’s bank to stop processing auto loans with as many as 1,100 independent dealerships and refocus on dealerships it already has close relationships with.
  • The change is likely to affect used car buyers more, but they can still get loans from other banks to buy their vehicles.
  • If the dealership is already switching to multiple lenders for its customers, this change might not be noticeable to someone buying a car.

    Buyers might need to budget for additional logistical steps if they are buying a car from an independent dealership and had planned on getting a loan from Wells Fargo. The financial institution, which has faced more than its fair share of consumer fraud charges since the turn of the century, will stop its indirect auto loans from up to 1,100 independent car dealerships in the United States. This represents approximately 10% of the total number of lenders Wells Fargo deals with. The change, first reported by CNBC, is likely to affect used car buyers more than new car buyers.

    Wells Fargo says it is doing all it can to help customers during COVID-19, such as offering loan deferrals to customers who have been impacted by the pandemic, but it will not continue to work with independent resellers that it does not have a “deep, long-standing relationship” with, the company said in a statement sent to Car and driver.

    “As a responsible lender, we also have an obligation to review our business practices in light of the economic uncertainty presented by COVID-19 and have advised the majority of our independent reseller customers that we will be suspending acceptance of their demands,” the company said. mentioned.

    Wells Fargo does business with approximately 11,000 dealerships in the United States and said CD that its new policy affects less than 10% of these relationships. Wells Fargo does not deal directly with dealerships in these relationships, but lends money to car buyers themselves. With the policy change, car buyers at independent dealerships that Wells Fargo cuts ties with will no longer be able to get loans from the company. Of course, those customers can still get financing from other lenders, but the change may add a step to the process if buyers need to seek loans from banks that don’t have an agreement with the dealership. Or the change may not be noticeable to the buyer at all, if the dealer uses multiple lenders and simply sends new loan requests to another lender with which he has a relationship.

    Wells Fargo’s History with Auto Loans

    Wells Fargo has had a bumpy car loan business in recent years. In 2018, the company reinvigorated its auto loan business after it paid a $1 billion fine for violating the Consumer Financial Protection Act by forcing its auto loan customers to purchase insurance that they didn’t need, according to the Consumer Financial Protection Bureau. Wells Fargo auto loans were $6.5 billion in the first quarter, a 19% increase from the first quarter of 2019, the company said in April, adding that it reflects “our renewed focus on auto loan growth following corporate restructuring.

    The financial institution also committed massive customer fraud between 2002 and 2016 when it created millions of accounts in customers’ names without telling them. In February, when the New York Times reported, Wells Fargo has agreed to pay $3 billion to settle these charges.

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