WASHINGTON (Reuters) – Wells Fargo & Co. executives were warned that an auto insurance plan could overload customers four years before the bank would delete the program, according to a complaint released by a judge this week.
FILE PHOTO: A Wells Fargo logo can be seen at the SIBOS banking and financial conference in Toronto, Ontario, October 19, 2017. REUTERS / Chris Helgren / File Photo
Several executives, including the then General Counselor James Strother and Chief Auditor David Julian, were informed among bank officials in 2012 about possible shortcomings in the auto insurance program that ended in 2016, according to parts of a class-action lawsuit that were not closed on Monday.
An officer from Wells Fargo declined to comment on the allegations in the lawsuit, but said the bank intended to repay all injured clients.
"We have reviewed customer accounts and prepared a recovery plan – which we hope to complete shortly," said Natalie Brown, spokeswoman.
Strother, Julian and other executives mentioned in the lawsuit could not be reached immediately for comment. Last month, regulators Julian and another bank employee warned that they could get sanctions for their previous work with Wells Fargo.
Wells Fargo ended the auto insurance program in September 2016, after an internal review showed that many customers were wrongly placed in a valuable product that they did not need.
The bank had the right to force car users to take part in the product, the so-called collateral protection insurance & # 39; (CPI), if they cancel their own policies. But in the end, the bank said that around 600,000 customers were unnecessarily forced into CPI when it reached a $ 1 billion regulatory regime in April.
Wells Fargo initially estimated that remediation efforts would cost $ 64 million, but that figure has since swelled because it determined that more borrowers owed larger amounts. In the third quarter, Wells Fargo set aside $ 241 million for the affected customers.
The misuse of motor insurance is part of a broader scandal than the treatment of customers by Wells Fargo. The bank revealed more than two years ago that millions of fake accounts were opened in customer names without their permission to achieve sales targets.
The San Francisco-based lender has since found sales abuses in companies ranging from mortgage loans to asset management.
The lawsuit was initially filed in the American District Court, Central District of California, in August. Wells Fargo has been fighting to keep details of the case under water.
The prosecutors say that they are customers who ask for compensation for unlawful costs and claim that Wells Fargo pushes policy-bearing drivers more often than prosperous customers.
Wells Fargo was 10 times more likely to force borrowers with damaged credit into CPI insurance than those with high credit scores, according to the process, which cites an internal bank presentation.
Directors of Tesla vehicles and others with high loan balances were exempt from CPI, according to the lawsuit.
Reporting by Patrick Rucker; Edited by Lauren Tara LaCapra and Phil Berlowitz