Wells Fargo sued over auto insurance scam
San Francisco-based Wells Fargo Bank is facing a new consumer lawsuit, in this case concerning unneeded auto insurance fees for several hundred thousand customers.
The lawsuit was filed in federal court in San Francisco Monday by Keith Preston, a Nevada resident who had a car loan financed by Wells Fargo.
Preston claims Wells Fargo additionally charged him “thousands of dollars” for auto insurance through a vendor, National General Insurance, that duplicated insurance he already had, even though he repeatedly informed the bank about his existing policy.
The lawsuit seeks to be certified as a class action on behalf of all other U.S. customers who had Wells Fargo auto loans and were charged for duplicative auto insurance.
Last week, shortly after the New York Times published a story on the fees, Wells Fargo acknowledged that about 570,000 customers were affected by auto insurance policies between 2012 and 2017, and said it will pay them $80 million in compensation.
The bank said the customers included 490,000 people who were given insurance plans that duplicated coverage they already had. They will receive refunds of $25 million.
A second group of 60,000 borrowers in five states did not receive complete disclosure about the policies as required in those states, and will receive $39 million.
Finally, the bank said, the additional auto insurance may have contributed to 20,000 people defaulting on their loans and having their cars repossessed. That group will receive $16 million in compensation.
Wells Fargo said it will also worked with credit bureaus to correct customers’ credit records.
The bank said, “We are extremely sorry for any harm this caused our customers.” The new lawsuit says, “Wells Fargo’s efforts amount to too little, too late” and says the company’s policies caused “significant stress, hardship and financial losses” to its customers, including in some cases severe damage to their credit records.
The suit is based on claims of racketeering, violation of California’s unfair business practices law, and wrongful taking of money. It seeks an injunction against Wells Fargo and compensation for customers, which under federal racketeering law can be tripled.
Wells Fargo has previously been sued for allegedly opening unauthorized accounts, making unauthorized changes in mortgage loans and calculating overdraft fees in an unfair way.