Wells Fargo Bank to pay $575 million to resolve claims

Wells Fargo Bank N.A. will pay $575 million to resolve claims it violated state consumer-protection laws. Arkansas Attorney General Leslie Rutledge said Friday the settlement is the result of multiple investigations by all 50 states and the District of Columbia of allegations Wells Fargo was engaging in a number of unfair and deceptive business practices. The State of Arkansas will receive almost $1.3 million.

The settlement resolves claims the bank violated state consumer protection laws. It did so by opening millions of unauthorized accounts and enrolling customers in online banking services without their knowledge or consent and improperly referring customers for enrollment in third-party renters and life insurance policies.In addition, claims included improperly charging auto loan customers for force-placed and unnecessary collateral protection insurance, failing to ensure customers received refunds of unearned premiums on certain optional auto finance products, and incorrectly charging customers for mortgage rate lock extension fees.Wells Fargo identified more than 3.5 million accounts where customer accounts were opened, funds were transferred, credit card applications were filed and debit cards were issued without the customers’ knowledge or consent.

The bank has also identified 528,000 online bill pay enrollments nationwide that may have resulted from improper sales practices at the bank.

In addition, Wells Fargo improperly submitted more than 6,500 renters insurance or simplified term life insurance policy applications and payments from customer accounts without the customers’ knowledge or consent.

Through this settlement, Wells Fargo will also create a consumer redress review program which consumers who have not been made whole through other restitution programs already in place can seek review of their inquiries or complaints by a bank escalation team for possible relief. To date, this settlement represents the most significant engagement involving a national bank by state attorneys general acting without a federal law enforcement partner.

The states alleged Wells Fargo imposed aggressive and unrealistic sales goals on bank employees and implemented an incentive compensation program where employees could qualify for credit by selling certain products to customers. The states further alleged the bank’s sales goals and the incentive compensation program created an impetus for employees to engage in improper sales practices in order to satisfy such sales goals and earn financial rewards. Those sales goals became increasingly harder to achieve over time, the states alleged, and employees who failed to meet them faced potential termination and career-hindering criticism from their supervisors.

The states also alleged Wells Fargo improperly charged premiums, interest, and fees for force-placed collateral protection insurance to more than two million auto financing customers, despite evidence the customers’ regular auto insurance policy was in effect, and despite numerous customer complaints about such unnecessary placements. Wells Fargo has agreed to provide remediation of more than $385 million to approximately 850,000 auto finance customers. The remediation will include payments to over 51,000 customers whose cars were repossessed.

Additionally, the states alleged Wells Fargo failed to ensure customers received proper refunds of unearned portions of optional Guaranteed Asset/Auto Protection (GAP) products sold as part of motor vehicle financing agreements. As a result, the bank has agreed to provide refunds totaling more than $37 million to certain auto finance customers.

Finally, the states alleged Wells Fargo improperly charged residential mortgage loan consumers for rate lock extension fees even when the delay was caused by Wells Fargo, a practice contrary to the bank’s policy. Wells Fargo has identified and contacted affected consumers and has refunded or agreed to refund over $100 million of such fees.

Wells Fargo has previously entered consent orders with federal authorities, including the Office of the Comptroller of the Currency (OCC) and the Consumer Financial Protection Bureau (CFPB),  related to its alleged conduct. Wells Fargo has committed to or already provided restitution to consumers in excess of $600 million through its agreements with the OCC and CFPB as well as through settlement of a related consumer class-action lawsuit and will pay over $1 billion in civil penalties to the federal government. Additionally, under an order from the Federal Reserve, the bank is required to strengthen its corporate governance and controls, and is currently restricted from exceeding its total asset size.

As part of its settlement with the states, Wells Fargo has agreed to implement, within 60 days, a program through which consumers who believe they were affected by the bank’s conduct, but fell outside the prior restitution programs, can contact Wells Fargo to be reviewed for potential redress. Wells Fargo will create and maintain a website for consumers to use to access the program and will provide periodic reports to the states about ongoing restitution efforts.

More information on the redress review program, including Wells Fargo escalation phone numbers and the Wells Fargo dedicated website address for the program will be available on or before Feb. 26th, 2019.

Wells Fargo operated an office in Mountain Home until early October when a group of 12 investors formed a new local investment company.

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