Wells Fargo has said it set aside $80 million to reimburse more than 570,000 customers who were forced by the bank to purchase auto insurance they didn’t need. But a confidential report from the Office of the Comptroller of the Currency suggests Wells has likely underestimated how much it would cost to reimburse consumers harmed by the scam, according to the New York Times.
Wells has been reeling in recent months from a litany of scandals, including one that entailed requiring an estimated 800,000 people to purchase auto insurance they never needed. The bank required auto loan customers to maintain “comprehensive and collision physical damage insurance, and if they couldn’t provide evidence of any, Wells was contractually allowed to purchase coverage for them.
When customers bought a car through Wells, their information would be sent along to the company that provided the lender-placed insurance, National General. The insurer was supposed to confirm if an owner already had coverage—and if they didn’t, the collateral insurance would be immediately added to their account.
That was the main issue, Wells has said. The company told Jalopnik in September that “internal controls” failed to make sure the process worked seamlessly. As a result, an internal report commissioned by Wells found, an estimated 274,000 customers became delinquent on their account, while around 25,000 vehicles were wrongfully possessed.
And now, the confidential report obtained by the Times states that Wells Fargo management ignored signs of notable problems with the business.
In the comptroller’s report, regulators said management at the bank’s auto loan unit, Wells Fargo Dealer Services, had ignored signs of problems in the business such as consumer complaints, focusing instead on sales volume and performance. The report described its management of compliance risk — essentially the ability to abide by regulations and best practices — as “weak.” It noted that Wells Fargo in 2015 had characterized the risks associated with this business as “low.”
The $80 million is likely not enough, as well, the report said:
Wells Fargo has set aside $80 million to compensate the 570,000 customers it said were harmed by receiving auto insurance they didn’t want. The comptroller’s office said that the amount was inadequate and that the bank might have to pay out substantially more as additional victims were identified — partly because Wells Fargo’s analysis of how much money it needed to set aside excluded many years when the insurance was being imposed.
The report is preliminary, the Times said, and it could lead to possible financial penalties by the comptroller office.