The state of California is gearing up to investigate allegations that Wells Fargo and National General Insurance sold residents insurance they didn’t need.
According to a news report in Reuters, citing California Insurance Commissioner Dave Jones, the regulator said the state is looking into what is called forced placed or lender placed auto insurance that was underwritten by National General Insurance for Wells Fargo customers.
The statement comes on the heels of another scandal, written up in a New York Times story detailing a 60-page report that showed the bank took advantage of 800,000 consumers who signed up for auto policies by signing them up for insurance that they did not need — and did not report wanting. Some of those customers continue to pay for that insurance to this day, according to an internal report prepared for the bank’s executive team, reported the New York Times in late July. The auto policies — which largely covered collision damage — were suspected to have pushed over a quarter-million customers into delinquency and resulted in almost 25,000 vehicle repossessions.
According to the Reuters report, the fraud inquiry by California regulators comes after two of Wells Fargo’s units were hit with subpoenas by the New York Department of Financial Services, which wants Wells Fargo to hand over loan contracts with borrowers in New York as well as financing agreements with auto dealers and agreements Wells reached with insurers.
Reuters noted Wells Fargo was made aware of the potential auto insurance scandal last year after the auto lending unit received a high number of complaints. Reuters cited Franklin Codel, who heads up consumer lending at Wells Fargo, for the information.
The bank has already said it will refund around $80 million, which will go to roughly 570,000 customers who were fraudulently charged for auto insurance they didn’t want from 2012 to 2017. Among those, 20,000 had vehicles that were repossessed, Reuters reported.