Wells Fargo revealed that it had planned to disclose problems uncovered with its auto insurance policies, but it was waiting until it was ready to reimburse affected customers.
In an interview with Reuters, Franklin Codel, head of consumer lending at Wells Fargo, said the business started noticing elevated customer complaint volumes in July 2016 and quickly suspended its auto collateral protection insurance (CPI) program and escalated issues to senior management, the board and regulators.
“The problem with disclosing to the marketplace today or several months ago is customers start calling and asking when they’re going to get their money,” he said.
The news comes after The New York Times revealed that 800,000 of Wells Fargo’s auto loan customers were charged for insurance they did not need. The company confirmed the news in a press release, admitting that after it reviewed policies placed between 2012 and 2017, it was discovered that approximately 570,000 customers may have been affected and would 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.
The company’s auto lending business has already been going through an overhaul this year, with Dawn Martin Harp, who headed the auto lending business during the sales abuses, retiring in April and her deputy, Bill Katafias, also leaving his post.
“Both of those executives, in my view, were held accountable for their actions,” Codel said, including “from a compensation perspective.”
Wells, the third-largest U.S. bank, was already dealing with another scandal that involved thousands of branch employees who created as many as 2.1 million phony deposit and credit-card accounts in customers’ names without their permission over a period of several years.
Since that time, lawmakers have released information suggesting small business and brokerage customers may have had phantom accounts opened in their names, and Prudential Financial Inc. cut ties with Wells over accusations that bankers were improperly enrolling customers in its insurance policies without their knowledge.