A class action lawsuit asserts that the bank’s executives were warned about the problems.
A class action lawsuit now accuses Wells Fargo executives of having been warned several years ago that the auto insurance program could have been overcharging car loan customers.
A judge released this complaint earlier this week, at a time when Wells Fargo faces legal sanctions.
The bank is in the midst of dealing with legal sanctions applied against it after it forcibly enrolled approximately two million of its customers in a special auto insurance program. This “collateral protection insurance” product was not required by the customers who were forced to pay for it.
The class action lawsuit states that in 2012, officials at Wells Fargo had been briefed about potential flaws in the auto insurance program. Among the officials were James Strother, the general counsel at the time, and David Julian, the chief auditor.
Wells Fargo is placing its focus on repaying customers affected by the auto insurance program.
“We have been reviewing customer accounts and developing a remediation plan – which we hope to finalize very soon,” said a spokesperson for the bank, Natalie Brown, as quoted in an Insurance Business Mag report.
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In a separately released statement, Wells Fargo explained that it could take the bank until 2020 before it will be able to complete all the repayments to affected customers. The Office of the Comptroller of the Currency (O.C.C.) has already rejected a previous repayment strategy put forward by the bank. That authority stated that the bank’s efforts were inadequate for compensating the hundreds of thousands of affected customers, as was reported by Live Insurance News in September.
The scandal had to do with an auto insurance program Wells Fargo discontinued in September 2016. Before that time, the idea was that drivers who took out auto loans with the bank but who allowed their car insurance to lapse would be charged for collateral protection insurance. It was to be a type of “force placed” insurance, similar to the type mortgage insurance companies will purchase on behalf of homeowner borrowers whose properties are not covered. That said, among the 2 million people enrolled in the program, an estimated 600,000 were wrongly placed.
Many of those auto insurance program customers were overcharged, lost the ability to afford their payments, had their vehicles repossessed and experienced harm to their credit scores. As a result, Wells Fargo received a $1 billion penalty from federal regulators.