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Wells Fargo & Co. expects to refund all borrowers who were falsely charged for auto insurance they did not need by the second quarter, but the lender has had a rocky start to the process, according to a report from The Wall Street Journal.
The bank acknowledged that it wrongly sent some 38,000 letters to borrowers who were not affected by the insurance scandal. The letters did not contain checks and in some cases, the letters were sent to consumers who don’t even have an auto loan through Wells Fargo Auto.
“We are focused on making things right for our customers and ensuring this large-scale remediation happens correctly and as quickly as possible,” a Wells Fargo spokeswoman told Auto Finance News in a statement. “Communications to date have been intentionally focused on accounts with smaller refunds and requests for customers to send us additional information. We’re handling it this way so if there are any issues with the process, we can catch them quickly and make adjustments along the way.”
More than 100,000 checks have been sent out so far and Wells Fargo has been working with regulators to approve the refunds as they go out, according to the WSJ report. The bank is starting with customers who are owed less than $100 and scaling up from there in phases. Some of the details Wells Fargo is still working out include states with more complicated legal processes, and consumer claims of lost wages, out of pocket financial costs, as well as emotional and mental distress, according to the report.
Wells Fargo hired the vendor Epiq to confirm the lender’s list of recipients, and a “coding mistake” was the cause of the incorrect letters. Wells Fargo is working with the vendor “to ensure these customers receive the appropriate communication — including any refunds they’re eligible for,” according to the statement.
In the summer of 2017, the bank admitted to charging 570,000 consumers for a collateral protection insurance they did not need or know they were paying for and issued an $80 million refund to affected consumers. The practices pushed 274,000 borrowers, among them active military servicemembers, into delinquency and another 20,000 had their car repossessed.
However, the Office of the Comptroller of the Currency has said Wells Fargo has not set aside enough money to properly refund all consumers. Additionally, the WSJ report cites a source familiar with the process who claims the bank is planning on sending out 800,000 checks, up from its initial estimate of 570,000.
“Because this is an ongoing remediation, estimates we’ve previously shared may change over time as we work with regulators to finalize our remediation plan,” the spokeswoman told AFN. “We haven’t released updated numbers since last summer.”
Wells Fargo itself identified the underlying problem of the insurance scandal as improper vendor oversight, the spokeswoman previously told AFN.
“We are overlooking how we oversee vendors to make sure we’re checking and double checking, with the right frequency,” she said in August 2017. “If you don’t check something often enough, the process can get stale and unintended consequences occur. We intend to keep that from happening.”