New York regulator investigating Wells Fargo auto insurance policies
New York’s state insurance regulator is investigating last week’s revelation that Wells Fargo & Co. forced auto insurance policies on borrowers who didn’t need them — a matter that’s also drawing attention from Democrats on Capitol Hill.
The San Francisco bank acknowledged it charged 570,000 auto-loan borrowers for the unnecessary insurance. Now, the New York Department of Financial Services has subpoenaed records from Wells Fargo and its insurance provider, National General Insurance Co., over those policies.
The department does not regulate Wells Fargo, but does oversee National General’s operations in the state. A department spokesman confirmed subpoenas were served late Tuesday but otherwise declined comment. Reuters reported the move early Wednesday.
Representatives for Wells Fargo and National General did not respond to requests for comment.
The policies, called collateral protection insurance, are only supposed to be issued when auto-loan borrowers have not bought insurance of their own. In some cases, the bank admitted it did properly notify customers about the policies. And in about 20,000 cases, the added cost of the insurance led borrowers to default and have their cars repossessed.
The bank said it would pay $80 million in refunds and restitution to harmed customers. The bank said it identified the issue itself last year and stopped the practice in September. A day before the bank announced its remediation plans, the New York Times reported on the unneeded insurance policies, citing a report prepared for the bank by a consulting firm.
Already, consumer lawsuits seeking class-action status have been filed against the bank. The New York financial services department is the first government agency to publicly look into the matter, though it may not be the last.
Last year, after Wells Fargo reached a $185-million settlement with federal regulators and the city and county of Los Angeles over its creation of millions of unauthorized checking, savings and credit card accounts, other government agencies announced their own investigations into the bank’s practices.
The California Department of Insurance last year also opened an investigation into allegations that Wells Fargo had signed up customers for Prudential life insurance policies without their consent.
Spokeswoman Nancy Kincaid said Tuesday the department is “looking into a number of allegations against Wells Fargo,” though she declined to comment on whether the auto-insurance policies were among them.
As with the unauthorized accounts scandal, lawmakers on Capitol Hill are getting involved.
Democratic members of the House and Senate banking committees sent letters on Tuesday to their respective committee chairmen, asking for public hearings with testimony from Wells Fargo Chief Executive Tim Sloan and Chairman Stephen Sanger.
Democrats wrote that they wanted to inquire about several issues, including the insurance matter and other allegations that have surfaced in the 11 months since the bank reached its $185-million regulatory settlement.
“Many Committee members have sought additional information from Wells Fargo about these developments, with varying degrees of success,” the letter stated. “A hearing would give members the opportunity to hear directly from the bank’s top leadership about these developments.”
Committee staff did not respond to a request for comment.
The requests for hearings come as Democrats also seek to derail Republican plans to ease financial regulations and defang the Consumer Financial Protection Bureau.
Democrats have held up Wells Fargo as an example of why strict financial regulations and consumer protections should be kept in place.
In particular, they have used the bank’s practice of pushing consumer disputes out of court and into private arbitration as an example of why a new rule proposed by the Consumer Financial Protection Bureau — and staunchly opposed by Republicans and a key Trump appointee — should be allowed to stand.
In a party-line vote, House Republicans voted last week to scrap the rule before it takes effect. The Senate has yet to vote on the measure.
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