Yet Another Auto Insurance Issue for Wells Fargo: Reports
Wells Fargo & Co.’s U.S. regulators are looking into another issue involving insurance linked to auto loans as scrutiny of a key lending unit widens, according to people with knowledge of the matter.
The Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau are examining Wells Fargo’s guaranteed auto protection insurance program, said the people, who asked not to be named discussing regulatory matters. The insurance has also been of interest to the Federal Reserve, another person said.
Wells Fargo said in a regulatory filing last week that it had identified “certain issues related to the unused portion” of insurance agreements that could result in refunds to customers. So-called GAP insurance covers the difference between what a customer owes on a car loan and the value an insurance company will give to the customer if the car is destroyed in an accident or stolen.
The same three regulators have been in discussions with Wells Fargo on another kind of auto-loan insurance, Franklin Codel, the lender’s head of consumer lending, told Bloomberg in an interview late last month. The regulators were notified “very promptly” after Wells Fargo received consumer complaints about its collateral protection insurance practices in July 2016 and have been kept up-to-date since, Codel said.
Wells Fargo’s reputation among consumers has been jolted again over the last few weeks after it was revealed it may have forced unwanted insurance on customers who took out car loans. On Tuesday, California’s insurance regulator said he would investigate the bank and the insurer, National General Holding Corp., over the “improper placement” of such coverage.
The bank said in its quarterly filing Friday that it expects to find and fix more issues in its auto-lending business, potentially including how it creates, services and collects on indirect loans and linked insurance products. It said those issues may spark investigations from regulators.
Wells Fargo disclosed it faces additional government probes, including a look into whether consumers were “unduly harmed” by the bank freezing and closing accounts suspected of fraudulent activity. And it’s still trying to pinpoint how many bogus accounts employees opened without client permission while trying to hit sales targets, a scandal that first came to light last year.
The New York Times reported the Fed’s inquiry into the GAP insurance issue yesterday.
Catherine Pulley, a Wells Fargo spokeswoman, declined to comment about any potential discussions with regulators over the insurance practices. Representatives for the OCC and the CFPB declined to comment.
“We do not comment on confidential, firm-specific supervisory matters,” the Fed said in a statement. “We work closely with the OCC and CFPB, the regulators with primary and direct oversight in this area.”
In a statement, Wells Fargo said it thinks it can make refunding what’s owed to customers who have the GAP insurance “more consistent in the future” and that it can “make things right for customers in the past.”
“We promised to be transparent in our efforts to fix problems and build a better Wells Fargo and our disclosure of this issue in our 10-Q is an outcome of that promise,” the bank said in the statement.