The internal report highlighted a big problem with the insurance: Many customers were charged for auto insurance, even though they already had their own, cheaper policies. The Wells Fargo-backed policies could cost as much as $1,000 per year, plus interest if people didn’t pay up front, the Times says. Wells Fargo earned a commission on the premiums, according to the Times.
Many customers were charged for auto insurance, even though they already had their own, cheaper policies.
Wells Fargo’s insurance requirement is called “lender-placed insurance,” which means that the bank or other lender requires and applies a specific insurance policy on loans their customers take out. This is common for certain loans, such as mortgages, but it’s rarer for motor vehicle loans.
The Wells Fargo insurance requirement in question involved insurance policies underwritten by National General Insurance and sold by Wells Fargo insuring customers’ vehicles between January 2012 and July 2016. The policies included features like collision coverage, which consumers often already had purchased on their own.
How it was supposed to work, according to the Times: When a customer got a car loan with Wells Fargo, that person’s information would go to National General, which should have used a database to determine if the customer already had insurance coverage. If not, National General would automatically add the coverage to the customers’ accounts.
However, the procedure wasn’t flawless, especially if the redundancies slipped under consumers’ radars because their payments were automatically deducted from their accounts. The issues went beyond that, though.