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Wells Fargo has Ripped Off Veterans, Auto Loan Customers and Homeowners: The Feds Do Nothing

Posted by Neil Garfield | August 8, 2017

USA TODAY | by Kevin McCoy | August 8, 2017

Wells Fargo CEO Tim Sloan took over the company last year after the fake accounts scandal. (TIME)

New legal challenges are piling up for Wells Fargo as the U.S. banking giant tries to rebuild trust with customers and investors after a scandal over millions of unauthorized accounts.

The San Francisco-based bank says it has discovered “issues” involving customer refunds from optional guaranteed asset protection or so‐called GAP coverage that’s sold to auto loan borrowers when they buy a vehicle.

Separately, a new federal lawsuit has accused Wells Fargo's merchant services unit of misleading businesses about fees for credit card processing.

Added to a collision insurance policy, GAP coverage can help pay the difference between the amount a borrower would owe on a car lease or loan, and the total the insurer would pay if the vehicle is stolen or declared a total loss after an accident.

Borrowers typically are entitled to refunds for a portion of the GAP insurance premiums if they repay their auto loans early.

However, In the bank’s second‐quarter earnings report issued Friday, Wells Fargo said it had discovered issues involving GAP insurance that could result in paying overdue refunds to customers in some states.

“During an internal review, we discovered issues related to a lack of oversight and controls surrounding the administration of guaranteed asset protection products,” Wells Fargo spokeswoman Catherine Pulley said in a statement issued Tuesday. “We believe we can make the refund process more consistent for customers in the future and make things right for customers in the past.”

Two of the bank’s federal regulators, the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau, declined to comment on the refund issue.

The Federal Reserve, which oversees the bank’s overall risk management compliance, as well as financial safety and soundness, said it does not comment on “confidential, firm‐specific supervisory matters.”

The separate lawsuit against Wells Fargo’s merchant services unit was filed Friday by a Patti’s Pitas, a Pennsylvania restaurant, and Queen City Tours, a tour operator based in Charlotte, N.C.

Wells Fargo uses a confusing, 63‐page program guide that outlines fees charged for processing credit card payments, the lawsuit alleged. However, the bank unit improperly “implements mark‐ups by inflating ‘pass through’ costs, increasing agreed‐upon fees, and imposing new junk fees,” the lawsuit alleged.

The lawsuit seeks class-action status on behalf of other companies that may have been overcharged.

“The accusations outlined against Wells Fargo in this lawsuit do not reflect how we operate our Merchant Services business. We believe our negotiated pricing terms are fair and were administered appropriately,” the bank said in a statement that added it plans “to defend against the misrepresentations outlined in the lawsuit.”

Wells Fargo has labored to make amends since the bank was hit with $185 million in penalties by federal and state officials for opening millions of accounts that may not have been authorized by customers.

The scandal stemmed from internal sales goals that pushed bank employees to open multiple accounts, credit cards, and other financial products for customers. The bank has since ousted some top managers, paid $3.26 million in customer refunds and revamped its compensation program to remove the sales goals from decisions on employee pay raises.

Wells Fargo says number of ‘unauthorized accounts’ could be even higher

However, the bank’s latest quarterly earnings report disclosed that a continuing review of the embarrassing episode “may lead to a significant increase in the identified number of potentially unauthorized accounts” that tops earlier estimates.

 

Back to August 2017 Archive

 

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