Regulation

Wells Fargo May Be On The Hook For Prudential’s Scandal-Related Costs

Dragged into the Wells Fargo false account scandal by questions as to whether or not retail bankers improperly sold its insurance, Prudential Financial Inc has made it clear it may look to Wells Fargo to cover its costs. The improper insurance account openings have made Prudential the target of both probes and lawsuits.

“The company has provided notice to Wells Fargo that it may seek indemnification under the MyTerm distribution agreement,” Prudential said in a Feb. 17 regulatory filing.

It remains unknown how much Prudential may be seeking. The request from the New Jersey-based insurance company is yet another cost Wells can add to the pile associated with its great sales scandal.

Federal regulators ordered Wells Fargo to pay $190 million in fines and restitution after an investigation turned up strong evidence that the high-pressure sales environment pushed employees to open as many as 2 million deposit and credit card accounts without customers’ permission.

In the wake of the scandal, Prudential suspended MyTerm, a low-cost life insurance policy it sold through Wells. The suspension will remain in effect until an investigation of how exactly the policy was being sold is completed.

Prudential has also recently been named in a lawsuit by three former managers in its corporate investigation division. The former employees claim they warned Prudential that Wells employees signed up bank customers for the Prudential policies without the customers’ knowledge or permission. Banks are not licensed to sell insurance directly — meaning Wells Fargo employees ought to have either pushed interested parities toward a self-service kiosk or online where policies could be easily reviewed and purchased.

The investigation indicates that policies were opened and closed after a month or two and then reopened.  Prudential also faces a class action lawsuit on behalf of Wells Fargo customers who said they were unknowingly signed up for Prudential policies.

——————————

PYMNTS LIVE ROUNDTABLE: TUESDAY, JULY 14, 2020 AT 12:00 PM (ET)

Digital transformation has been forcefully accelerated, but how does that agility translate into the fight against COVID-era attacks and sophisticated identity threats? As millions embrace online everything, preserving digital trust now falls mostly on banks and FIs. Now, advances in identity data and using different weights on the payment mix afford new opportunities to arm organizations and their customers against cyberthreats. From the latest in machine learning for fraud and risk, to corporate treasury teams working in new ways with new datasets, learn from experts how digital identity, together with advances like real-time payments, combine to engender trust and enrich relationships.

Click to comment

TRENDING RIGHT NOW