Wells Fargo will pay customers US$386 million over unwanted auto insurance
REUTERS: Wells Fargo & Co will pay customers at least US$386 million to settle class-action claims that the bank signed them up for auto insurance they did not want or need when they took out car loans.
The proposed settlement was disclosed in filings on Thursday with the U.S. District Court in Santa Ana, California, and requires a judge’s approval.
National General Insurance Co, an underwriter, will pay an additional US$7.5 million, making the total customer payout at least US$393.5 million, according to the filings.
Wells Fargo denied wrongdoing but said it settled to avoid the risks, cost and distraction of litigation, and has set aside enough money for the payout. The defendants will also pay up to US$36.5 million for the customers’ legal costs, court papers showed.
In an email, Wells Fargo called the settlement “an important step in making things right for customers.”
“We will continue sending individualized letters to customers that clearly set out the remediation amount due to them, as well as a check for that amount,” it added.
Lawyers for the customers did not immediately respond to requsets for comment.
Wells Fargo is trying to rebuild trust after being beset since September 2016 by a series of scandals over how it treats customers, including by wrongly charging an estimated 600,000 auto loan borrowers for insurance. [nL2N1X51T4}
In April 2018, Wells Fargo agreed to pay US$1 billion to the Consumer Financial Protection Bureau and Office of the Comptroller of the Currency to settle U.S. probes of the San Francisco-based bank’s auto insurance and mortgage practices.
Wells Fargo remains unable to expand under restrictions imposed in February 2018 by the Federal Reserve until the bank, the nation’s fourth-largest by assets, cleans up its culture and oversight.
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Thursday’s settlement covers Wells Fargo customers charged for “collateral protection insurance” between Oct. 15, 2005 and Sept. 30, 2016.
The complaint said Wells Fargo’s wrongful practices caused nearly 275,000 customers to become delinquent and nearly 25,000 vehicles to be illegally repossessed.
Through Thursday, Wells Fargo’s share price had been little changed since the scandals broke, while the KBW Nasdaq Bank Index had risen 33 percent.
The case is In re Wells Fargo Collateral Protection Insurance Litigation, U.S. District Court, Central District of California, No. 17-ml-02797.
(Reporting by Jonathan Stempel in New York; Editing by Dan Grebler and Cynthia Osterman)