Wells Fargo & Company agreed to pay $575 million to settle a multistate investigation into its misconduct involving its sales practices, mortgage-rate lock fees, and Collateral Protection Insurance on auto loans.
State Attorneys General across the United States alleged that Wells Fargo repeatedly violated consumer protection laws. In their investigations, they found that the bank set sales goals and incentive compensation program, which led to consumer abuses.
Well Fargo employees allegedly engaged in improper sales practices
The attorneys general noted that Wells Fargo employees “engaged in improper sales practices” to achieve sales goals and gain financial rewards. Wells Fargo failed to immediately detect and prevent employees from doing the following:
- Opening accounts without customers’ knowledge or consent;
- Transferring funds between customers’ accounts their knowledge or consent;
- Applying for credit cards without customers’ knowledge or consent;
- Issuing debit cards without customers’ knowledge or consent;
- enrolling customers into online banking services without their knowledge or consent;
- Submitting renters insurance and/or simplified term life insurance policy applications to AMIG, Assurant, Great West, and/or Prudential and making payments from customers’ checking and/or savings accounts without their knowledge or consent; and
- Engaging in misrepresentations and omissions to customers regarding Accounts and Insurance Referral Products.
In addition, the attorneys general noted that Well Fargo admitted that its employees opened over 3.5 unauthorized accounts and enrolled 528,000 customers in online bill pay.
The account openings and bill pay enrollments may have resulted from improper sales practices. Well Fargo identified and informed customers regarding the matter. The bank is providing remediation to those customers by entering into a $142 million class-action lawsuit settlement and implementing other solutions.
Wells Fargo allegedly force-placed Collateral Protection Insurance on auto loans
Furthermore, the attorneys general found that Wells Fargo added Collateral Protection Insurance (CPI) to auto loans if its vendor cannot verify whether an Auto Finance Customer had the required insurance.
Wells Fargo charged and forced-placed CPI policy to more than two million Auto Finance Customers between October 2005 and September 2016. The bank has been issuing refunds to customers in connection with the forced-placed CPI.
Wells Fargo alleged charged some borrowers with improper mortgage rate lock extension fees
Moreover, the attorneys general found that Wells Fargo improperly charged mortgage rate lock extension fees to some borrowers.
The bank admitted that 110,000 borrowers were inappropriately charged rate lock extension fees when it implemented a new Rate Lock Extension Fee policy. It identified and notified affected customers and refunded or agreed to refund over $100 million in rate lock extension fees.
California will get $148.7 million from the settlement
In a statement, California Attorney General Xavier Becerra, said, Wells Fargo “exploited” its customers by “signing them up for products they never wanted.” He emphasized that such action is “an incredible breach of trust” that threatens not just the customers but also the confidence in the banking system.
Additionally, Becerra stated, “As our investigation found, Wells Fargo’s conduct was unlawful.”
Becerra will obtain $148.7 million for California from the $575 settlement with the bank for its dishonest practices. The settlement is subject to court approval.