Company commits to consumer relief as part of resolving self-identified issue
Wells Fargo & Company (NYSE: WFC) today announced a plan to remediate
auto loan customers of Wells Fargo Dealers Services who may have been
financially harmed due to issues related to auto Collateral Protection
Insurance (CPI) policies.
Wells Fargo reviewed policies placed between 2012 and 2017 and
identified approximately 570,000 customers who may have been impacted
and will receive refunds and other payments as compensation. In total,
approximately $64 million of cash remediation will be sent to customers
in the coming months, along with $16 million of account adjustments, for
a total of approximately $80 million in remediation. Starting in August
2017, Wells Fargo will proactively reach out to impacted customers with
letters and refund checks.
“In the fall of last year, our CEO and our entire leadership team
committed to build a better bank and be transparent about those
efforts,” said Franklin Codel, head of Wells Fargo Consumer Lending,
which includes the Dealer Services unit. “Our actions over the past year
show we are acting on this commitment.”
Customers’ auto loan contracts require them to maintain comprehensive
and collision physical damage insurance on behalf of the lender
throughout the term of the loan. As permitted under those contracts,
Wells Fargo would purchase CPI from a vendor on the customer’s behalf if
there was no evidence — either from the customer or the insurance
company — that the customer already had the required insurance. CPI
insurance protects against loss or damage to a vehicle serving as
collateral to secure a loan and helps ensure that borrowers can pay for
damages to a vehicle.
In response to customer concerns, in July 2016 Wells Fargo initiated a
review of the CPI program and related third-party vendor practices.
Based on the initial findings, the company discontinued its CPI program
in September 2016. Since then, the company has gone through a
comprehensive review using independent consultants to ensure the
remediation plan it develops addresses customers’ situations in a
thorough and thoughtful way.
Wells Fargo’s review determined that certain external vendor processes
and internal controls were inadequate. As a result, customers may have
been charged premiums for CPI even if they were paying for their own
vehicle insurance, as required, and in some cases the CPI premiums may
have contributed to a default that led to their vehicle’s repossession.
“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 Codel. “Upon our
discovery, we acted swiftly to discontinue the program and immediately
develop a plan to make impacted customers whole.”
Wells Fargo already has been providing CPI-related refunds to some
customers and, beginning in August, will send letters and refund checks
to customers who are due additional payments. The process is expected to
be complete by the end of the year and is as follows:
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Approximately 490,000 customers had CPI placed for some or all of the
time they had adequate vehicle insurance coverage of their own. We
refunded the premium and interest for the duplicative coverage at the
time the customer made us aware of their other insurance. These
customers will receive additional refunds of certain fees and some
additional interest. Refunds for this group total approximately $25
million.
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In five states that have specific notification and disclosure
requirements, approximately 60,000 customers did not receive complete
disclosures from our vendor as required prior to CPI placement. In
these cases, even if CPI was required, customers will receive a refund
including premiums, fees and interest. Refunds for this group total
approximately $39 million.
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For approximately 20,000 customers, the additional costs of the CPI
could have contributed to a default that resulted in the repossession
of their vehicle. Those customers will receive additional payments as
compensation for the loss of their vehicle. The payment amount will
depend on each customer’s situation and also will include payment
above and beyond the actual financial harm as an expression of our
regret for the situation. Refunds for this group total approximately
$16 million.
For each of these categories, Wells Fargo will also work with the credit
bureaus to correct customers’ credit records, if applicable. Also as an
outcome of this review, Wells Fargo has taken additional steps to
tighten oversight of third-party vendors in Dealer Services. This is
consistent with a broader effort to strengthen how the Dealer Services
business manages risk and serves customers, which has included other
recently announced actions to centralize operational functions and
provide more consistency for customers, tighten credit standards, and
implement a new structure.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a diversified, community-based
financial services company with $1.9 trillion in assets. Wells Fargo’s
vision is to satisfy our customers’ financial needs and help them
succeed financially. Founded in 1852 and headquartered in San Francisco,
Wells Fargo provides banking, insurance, investments, mortgage, and
consumer and commercial finance through more than 8,500 locations,
13,000 ATMs, the internet (wellsfargo.com) and mobile banking, and has
offices in 42 countries and territories to support customers who conduct
business in the global economy. With approximately 271,000 team members,
Wells Fargo serves one in three households in the United States. Wells
Fargo & Company was ranked No. 25 on Fortune’s 2017 rankings of
America’s largest corporations. News, insights and perspectives from
Wells Fargo are also available at Wells
Fargo Stories.
Cautionary Statement About Forward-Looking Statements
This news release contains forward-looking statements about our future
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expectations, refer to our reports filed with the Securities and
Exchange Commission, including the discussion under “Risk Factors” in
our Annual Report on Form 10-K for the year ended December 31, 2016, as
filed with the Securities and Exchange Commission and available on its
website at www.sec.gov.
