Nearly a year after a major scandal over fake accounts, Wells Fargo is facing mounting fallout from a new crisis over auto insurance.
On Tuesday, Democratic members of the Senate Banking Committee, as well as three Democratic House members, urged separate hearings into San Francisco-based Wells, citing new developments at the company. That followed the filing this weekend of a class-action lawsuit in the insurance case, and renewed calls last week by U.S. Sen. Elizabeth Warren for the Federal Reserve to remove Wells board members. Meanwhile, shares of the San Francisco-based bank have slumped since the insurance revelations.
In the latest scandal, Wells admitted as many as 570,000 customers may have been charged premiums for auto insurance they did not need, a practice that in some cases may have also contributed to vehicle repossessions, the bank said.
Those admissions came after a New York Times story last week on an internal report prepared for the bank’s executives on the matter. Wells has since apologized to customers and said it will provide approximately $80 million in remediation.
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“Once again, it’s an issue of accountability and responsibility. Who knew about this?” industry analyst Nancy Bush said. “I just don’t understand it. Like a lot of other people I’m, A, mad and, B, mystified.”
The class-action suit, filed Sunday in federal court in northern California, accuses Wells of engaging “in a scheme to bilk millions of dollars from unsuspecting customers who were forced to pay for auto insurance they did not need or want.” It was filed by an Indianapolis man who said he was hurt by the practices after buying a vehicle with a loan from Wells Fargo in February 2016.
Wells Fargo spokeswoman Catherine Pulley said Tuesday the company discontinued the practice of buying insurance on behalf of customers in September 2016 after finding “inadequacies” in internal controls and vendor processes. Wells plans to provide remediation to customers who may have been financially harmed by auto policies placed between 2012 and 2017, she said.
“We are very sorry for the inconvenience this caused impacted customers, and we are in the process of notifying them and making things right,” Pulley said.
The fresh round of troubles comes even as Charlotte-based executive Mary Mack is introducing new changes this week affecting Wells Fargo’s branches to try and move the company past last year’s unauthorized accounts scandal.
Last summer, Mack was named the new head of Wells’ retail banking operation two months before it was engulfed in controversy over sales practices. Wells continues to reel over that crisis, in which authorities accused it of opening more than 2 million deposit and credit card accounts that may not have been authorized by consumers.
This year, Wells Fargo’s shares have continued to underperform those of its peers, which have been buoyed by investor hopes for higher interest rates and regulatory rollbacks. Wells Fargo’s shares dropped nearly 3 percent Friday after the news emerged, but have regained much of that ground this week.
In a letter Tuesday, U.S. Reps. Maxine Waters, Daniel Kildee and Al Green asked Republican Rep. Jeb Hensarling, chairman of the House Financial Service Committee, for a public hearing to review “ongoing violations of consumer rights by Wells Fargo.” Also Tuesday, all 11 Democratic members of the Senate banking committee asked Republican Chairman Mike Crapo for a September hearing with Wells CEO Timothy Sloan and board chairman Stephen Sanger on new findings since last year’s sales scandal.
Those letters came after Warren, Democrat from Massachusetts, on Friday wrote Federal Reserve Chairwoman Janet Yellen to renew a request Warren made last month to remove 12 Wells board members in place during the years the fake-accounts scandal took place. Warren said the auto insurance scandal serves as new evidence “that the Wells Fargo board violated its risk management obligations” in her latest request that the Fed invoke its legal authority to remove the members.
Pulley, the Wells spokeswoman, said the company understands and is committed to addressing policymaker concerns regarding the auto insurance findings.
“Customer harm is never acceptable,” she said. “We are committed to fixing these mistakes and earning back trust.”