Wells Fargo & Co., the bank struggling with multiple consumer scandals, was sent subpoenas by two New York regulators over practices in its auto lending unit.
Attorney General Eric Schneiderman has issued subpoenas relating to the unnecessary sales of collateral protection insurance, according to a person briefed on the matter, who asked not to be identified because the information wasn’t public. The New York State Department of Financial Services also sent subpoenas to a pair of Wells Fargo units, according to an email Wednesday from the agency.
The San Francisco-based bank last week said it may have pushed thousands of car buyers into loan defaults and repossessions by charging them for unwanted insurance. The bank said an internal review of its auto lending found more than 500,000 clients may have unwittingly paid for protection against vehicle loss or damage while making monthly loan payments, even though many drivers already had their own policies. The firm said it may pay as much as $80 million to clients with policies placed between 2012 and 2017 — with extra money for as many as 20,000 who lost cars, “as an expression of our regret.”
Customers have already started suing for damages. One suit filed in San Francisco federal court accuses the bank of bilking millions of dollars from “unsuspecting customers who were forced to pay for auto insurance they did not need or want.’’
Catherine Pulley, a Wells Fargo spokeswoman, declined to comment.
Wells Fargo’s head of consumer lending, Franklin Codel, said in an interview last week that the bank began reviewing the insurance issue about a year ago after hearing from clients. The bank commissioned the consulting firm Oliver Wyman to issue a report on its auto lending practices. The firm finished the report in February, a person with knowledge of the matter said last week.
“Upon our discovery, we acted swiftly to discontinue the program and immediately develop a plan to make impacted customers whole,” Codel said in the interview.
The Department of Financial Services also sent a letter requesting information from National General Insurance Co., the firm that provided the collateral protection insurance coverage for Wells Fargo. Christine Worley, director of investor relations at National General, didn’t immediately respond to a request seeking comment.