Wells Fargo & Co. finds itself in hot water, yet again, as they deal with the fallout from this auto-insurance scandal. The banking behemoth admitted to charging hundreds of thousands of customers for auto insurance that they did not need, or want. This caused many customers to take on an unexpected financial burden, which led to thousands of delinquencies and car repossessions. Many of the affected customers have banded together to file a class-action lawsuit against Wells Fargo demanding that they be compensated for this mistake.
These revelations come after a year of bad press for Wells Fargo as a result of several employees being found guilty of opening a possible 2.1 million credit card accounts without customers permission, over five years. This led to the bank paying $142 million in private litigation, and $185 million to regulators, in order to settle the case.
Wells Fargo will likely face similar costs as they work to deal with this auto-insurance issue. So far, they have paid out $80 million to an estimated 570,000 customers who were accidentally charged for auto insurance. Of those 570,000 customers, 20,000 had their cars repossessed as a result of this mistake.
According to the Insurance Journal, Wells Fargo spokeswoman Catherine Pulley declined to comment on the lawsuit, but in an email added: “We are very sorry for the inconvenience this caused impacted customers and we are in the process of notifying them and making things right”.
The consequences of this scandal have yet to reveal their full scope as Wells Fargo continues to deal with the fall out. Just this week New York state’s banking and insurance regulator issued subpoenas to two Wells Fargo & Co units.
So far, Wells Fargo’s only official statement on this issue comes from Franklin Codel, the head of consumer lending at Wells Fargo. Franklin said in an interview with The New York Times, “We have a huge responsibility and fell short of our ideals for managing and providing oversight of the third-party vendor and our own operations. We self-identified this issue, and we made the right business decisions to end the placement of the product”.