Unfair insurance practices earn Wells Fargo a $1 billion fine

Unfair insurance practices - Fine - Law - Gaval

The banking giant’s latest penalties are for having sold unnecessary auto insurance to customers.

Wells Fargo has been slapped with a $1 billion fine for its unfair insurance practices. Thousands of the bank’s vehicle loan customers were sold additional unnecessary auto insurance policies.

Those car owners ended up paying much more for their vehicles than was necessary.

Among those Wells Fargo customers, thousands ended up having their vehicles repossessed as a result of the unfair insurance practices.

The fine was laid down by the Consumer Financial Protection Bureau as well as the Comptroller of the Currency. The primary reason for the fine was indeed the unnecessary auto insurance requirement for car loan customers. That said, Wells Fargo has been wrapped in a number of scandals and this $1 billion was for other issues as well. For example, the bank was also found to be improperly charging borrowers for mortgage interest.

The organizations recently settled on the Wells Fargo unfair insurance practices fine.

Wells Fargo has already released estimates regarding additional efforts it plans to make to compensate its loan customers for its auto insurance policy and other missteps. For instance, it plans to provide around $145 million in cash remediation as well as a total of $37 million in account adjustments for affected customers.

Many consumer advocate groups are reminding customers that it is important to understand their rights before taking out an auto loan. They urge consumers to take the time to read fine print and know what it means. If they don’t understand, it’s perfectly acceptable to ask questions.

When a consumer takes out an auto loan, it is not uncommon for the lender to require a customer to carry collateral protection insurance. That makes the vehicle collateral so that if the loan payments are not made, the vehicle can be repossessed by the lender.

These regulations are upheld by both lenders and states. The amount of collateral protection insurance depends on where a consumer lives and with whom they take out the loan. That said, the Wells Fargo incident involved unfair insurance practices as it applied additional coverage – and premiums – that were not required for those borrowers.

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