NEW YORK – Wells Fargo, its reputation still stained from having opened millions of unauthorized customer accounts, is now having to apologize for another breach of trust.
The bank announced late Thursday that it will pay $80 million to customers who the bank signed up and charged for auto insurance that they did not want or need. Wells Fargo said that roughly 570,000 customers were affected and will be getting refunds.
Like most auto loan companies, Wells Fargo (WFC) required borrowers to have comprehensive and collision insurance. If they didn't have comprehensive coverage, Wells would purchase it for the customer and charge them for it as part of what it called its collateral protection insurance, or CPI, program.
Wells acknowledged its systems signed up customers who already had insurance. Worse, roughly 20,000 customers were unable to afford the car payment plus the insurance that some did not realize had been added to what they owed, and that "may have contributed to a default that led to their vehicle's repossession," the bank said.
The problems with the insurance program were found in July 2016, Wells Fargo said, and it was discontinued in September of that year. The bank said it will start contacting affected customers in August.
"We take full responsibility for our failure to appropriately manage the CPI program and are extremely sorry for any harm this caused our customers, who expect and deserve better from us," said Franklin Codel, head of consumer lending at Wells Fargo.
Nearly a year ago, Wells Fargo admitted its employeeswithout getting their permission in order to meet sales targets. An internal review by the bank found that employees had opened bogus accounts dating back to 2002.
The scandal eventually led to congressional investigations and the dismissal of CEO John Stumpf. The bank also paid $180 million in fines and penalties and recently reached a settlement to pay an additional $142 million to customers through a class-action lawsuit.
Wells Fargo shares fell $1.39, or 2.5 percent, to $53.32, in afternoon trading.