New scandal: another 570,000 (800,000?) customers become victims.
Wells Fargo – ‘a community-based financial services company,’ as it says – revealed late Thursday, after it learned that The New Times would blow its cover, that it had wrongfully charged 570,000 of its auto-loan customers for comprehensive and physical damage insurance (CPI) since 2012 though they already had their own insurance.
‘In response to customer concerns,’ Wells Fargo became aware of this issue in July 2016. It initiated a review of the ‘CPI program’ – as it calls this profit center – ‘and related third-party vendor practices,’ namely those of the insurance supplier National General. In September 2016, ‘based on the initial findings,’ it scuttled its ‘CPI program.’ It then hired a consulting firm to figure out what was going on.
The consequences were profound. The added insurance premium raised the car payment. If the increase was $50 per month on a particular vehicle, the total amount of additional money extracted from that customer over the duration of a six-year loan would be $3,600. Since many of these auto loans were set up on automatic payment on the customers’ accounts at Wells Fargo, these additional monthly amounts eventually drained the bank accounts and caused them to be overdrawn.
This post was published at Wolf Street by Wolf Richter ‘ Jul 29, 2017.