The company improperly forced borrowers to buy costlier auto insurance, contributing to nearly 25,000 wrongful vehicle repossessions.
Wells Fargo is preparing to refund tens of millions of dollars to auto loan borrowers that were forced to buy unnecessary car insurance.
In an announcement detailing the "self-identified issue," the company says around 570,000 customers from 2012-2017 may be due $64 million in cash remediation and $16 million in account adjustments, for a total of approximately $80 million.
Loan contracts required customers to maintain comprehensive and collision physical damage insurance throughout the term of the loan, matching standard industry practice. Wells Fargo would purchase the collateral protection insurance (CPI) from a vendor "on the customer's behalf if there was no evidence -- either from the customer or the insurance company -- that the customer already had the required insurance."
The problems relate to the bank's "external vendor processes" and internal controls, which apparently charged some customers for CPI even if they were paying for their own vehicle insurance. In some cases, the additional CPI premiums may have contributed to wrongful 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 Wells Fargo Consumer Lending head Franklin Codel. "Upon our discovery, we acted swiftly to discontinue the program and immediately develop a plan to make impacted customers whole."
The company has apparently admitted violating notification and disclosure requirements in five states, accounting for nearly half the compensation total.
Repossessions affected approximately 20,000 customers, all of whom will receive payment "above and beyond the actual financial harm as an expression of our regret for the situation."
The bank is still attempting to rebuild its reputation after regulators handed down nearly $200 million in fines for account fraud. Branch employees had created millions of savings, checking and credit accounts in customers' names without their consent.