Wells Fargo & Co. (NYSE: WFC) is being investigated by New York’s state insurance regulator for forcing auto insurance policies on 570,000 borrowers who don’t need it. The policies are called collateral protection insurance and are only supposed to be issued when auto loan borrowers have not bought insurance of their own. Cases include when the bank did admit that they properly notified customers about the policies but in 20,000 other cases, the bank added cost of the insurance to borrowers and as a result had their cars repossessed.
Wells Fargo did identify the issue last year and stopped the practice in September claiming that they would pay $80 million in refunds to customers. Already, consumer lawsuits seeking class action status have been filed and on top of that, the New York Times reported on the unnecessary insurance policies a day before the company was to announce their remediation plans.
Last year, the bank reached a $185 million settlement over the creation of millions of unauthorized checking, savings, and credit card accounts. Additionally, other government agencies including The California Department of Insurance investigated cases where the bank signed up customers for Prudential life insurance policies without consent.
Public hearings with testimony from Wells Fargo Chief Executive Tim Sloan and Chairman Stephen Sanger is expected to take place after democratic members of the House and Senate banking committees sent letters out on Tuesday.