Wells Fargo to settle $386-mn insurance suit

The agreement would resolve a lawsuit filed in July 2017, shortly after The New York Times published the results of an internal report the bank had commissioned on the matter

Wells Fargo has reached a $386 million deal to settle a class-action lawsuit brought by customers who say the bank forced them to buy unnecessary auto insurance, putting to rest one of its many legal problems. 

The agreement, described in court papers filed Thursday, would resolve a lawsuit filed in July 2017, shortly after The New York Times published the results of an internal report the bank had commissioned on the matter. The report found Wells Fargo had for years been buying a certain kind of auto insurance from National General Insurance and applying it to auto loan customers’ accounts without their knowledge.

Those borrowers were charged interest not just on their loans but on the insurance premiums as well, pushing more than 270,000 of them into delinquency.

Wells Fargo, the nation’s fourth-biggest bank, said it had already committed to using most of the settlement amount as part of the plan it developed to repair the damage its customers had suffered under the practice. National General Insurance, which according to the report paid Wells Fargo unearned commissions on the insurance policies, will pay $7.5 million as part of the settlement, bringing the total settlement amount to just under $400 million.The bank said the settlement was “an important step in making things right for customers.”

“We will continue sending individualized letters to customers that clearly set out the remediation amount due to them, as well as a check for that amount,” Natalie Brown, a Wells Fargo spokeswoman, said in a statement.

A spokeswoman from National General Insurance had no immediate comment.

The settlement puts to rest another component of a legal and operational crisis that has dogged the bank since it acknowledged engaging in a number of abusive practices, including opening phantom accounts in customers’ names, forcing them to buy unwanted products and charging them unnecessary fees.

It was the third major settlement reached by the bank since the start of 2018. It agreed to pay $1 billion to federal regulators to settle investigations into its lending practices and $575 million to resolve a number of state inquiries.

Despite those settlements, Wells Fargo is still working under an asset cap that was imposed by regulators in February 2018 after they determined the bank had not sufficiently fixed the internal problems that led to those abuses.