Wells Fargo Reviewing Aftermarket Auto Products To Get Ahead Of Any Issues

Car Loans

Wells Fargo is expanding the review of its auto products and the services it finances after customers purchase a vehicle at an auto dealership.

The Wall Street Journal reported the move is part of an effort by the financial institution (FI) to discover any issues before it faces more regulatory inquiries. Over the past few months, Wells Fargo has been looking at sales and potential refunds that would go to customers. Some of the products include extended warranties, roadside assistance and tire protection, among other things. While banks don’t sell these products, the costs associated with them can be included in auto loans, many of which are owned by big lenders, including Wells Fargo. The FI is already refunding customers who were forced to buy insurance as part of their auto loan even though they didn’t need or want it.

Wells Fargo spokeswoman Catherine Pulley told the WSJ the bank is looking at a wide set of aftermarket products to “improve processes for our consumer and dealer customers” and to help Wells Fargo “remain competitive in the market.” The WSJ noted that in 2017, the Office of Comptroller of the Currency (OCC) began an investigation into Wells Fargo concerning refunds the bank was issuing to customers who took out the unwanted insurance. At the same time, Wells Fargo began analyzing its aftermarket products in a broader fashion. As early as 2018, Wells Fargo discussed the business reviews with the OCC and the Consumer Financial Protection Bureau (CFPB) in an effort to prevent any new enforcement actions.

The WSJ stated that roughly 5 percent of Wells Fargo’s outstanding $55 billion auto loan portfolios are related to aftermarket products, or about $2 billion. Interest earned on the loans at Wells Fargo totals $100 million to $150 million a year, the paper noted. What’s more, it said about 70 percent of Wells Fargo’s auto loans have some aftermarket products, with many of them exceeding $1,000 — or in some cases close to 15 percent of the value of the car.