Wells Fargo Insurance Scandal Draws New York Subpoenas
By Laura J Keller and Chris Dolmetsch
August 2, 2017, 9:42 PM EDT
- Department of Financial Services says it subpoenaed bank units
- New York’s attorney general is also said to inquire over issue
Two New York regulators sent subpoenas related to practices in the auto lending unit of Wells Fargo & Co., the bank struggling with multiple consumer scandals.
The New York Department of Financial Services sent subpoenas to a pair of Wells Fargo units, according to an email Wednesday from the agency. Attorney General Eric Schneiderman also has issued subpoenas to bank consultant Oliver Wyman relating to the unnecessary sales of collateral protection insurance, according to a person briefed on the matter, who asked not to be identified because the information wasn’t public.
The San Francisco-based bank last week said it may have pushed thousands of car buyers into loan defaults and repossessions by charging them for unwanted insurance. The bank said an internal review of its auto lending found more than 500,000 clients may have unwittingly paid for protection against vehicle loss or damage while making monthly loan payments, even though many drivers already had their own policies. The firm said it may pay as much as $80 million to clients with policies placed between 2012 and 2017 — with extra money for as many as 20,000 who lost cars, “as an expression of our regret.”
Customers have already started suing for damages. One suit filed in San Francisco federal court accuses the bank of bilking millions of dollars from “unsuspecting customers who were forced to pay for auto insurance they did not need or want.’’
Catherine Pulley, a Wells Fargo spokeswoman, declined to comment. Francine Minadeo, a representative of Oliver Wyman, didn’t immediately respond to an email and a voice-mail message left after normal business hours.
Wells Fargo’s head of consumer lending, Franklin Codel, said in an interview last week that the bank began reviewing the insurance issue about a year ago after hearing from clients. The bank commissioned Oliver Wyman to issue a report on its auto lending practices. The firm finished the report in February, a person with knowledge of the matter said last week.
“Upon our discovery, we acted swiftly to discontinue the program and immediately develop a plan to make impacted customers whole,” Codel said in the interview.
The Department of Financial Services also sent a letter requesting information from National General Insurance Co., the firm that provided the collateral protection insurance coverage for Wells Fargo. Christine Worley, director of investor relations at National General, didn’t immediately respond to a request seeking comment.
(An earlier version of this story corrected the issuers and recipients of the subpoenas.)