Wells Fargo has agreed to pay around $385 million to settle a class action lawsuit in California alleging it signed up thousands of auto loan customers for costly car insurance without their consent, resulting in many repossessed vehicles. According to an ABC News report, the bank filed the agreement this week in a federal court in Santa Ana. A judge still needs to approve it. Wells Fargo has said this settlement agreement is “an important step in making things right” with customers and will send out checks to affected customers.
Scandals, Fraud, and Impropriety
The class-action lawsuit, which was filed in 2017, alleged that Wells Fargo tacked on insurance to customers’ car loans for more than ten years – insurance they didn’t need because they had private insurance. About 25,000 car owners could not pay the additional fees and had their vehicles repossessed. In 2017, the bank acknowledged adding $80 million in unnecessary insurance charges to nearly 800,000 auto loans.
This is one in a series of scandals involving Wells Fargo, starting in 2016, when it was exposed that bank employees opened millions of fake checking accounts to meet sales quotas. That scandal led to the resignation of the bank’s CEO, John Stumpf. In March, Stumpf’s replacement, Tim Sloan, stepped down after new improprieties, including the auto loan issues, came to light on his watch. Wells Fargo ended up paying the government a $1 billion fine last year. The Federal Reserve also stepped in and handcuffed the bank’s ability to grow its business until it could prove that it had gotten its house in order.
Justice for Victims
Banks are not just repositories for our money and valuables but also institutions that demand our trust. Wells Fargo’s checking account scandal and the auto loans scandal have questioned that trust. Wells Fargo will take a significant commitment to integrity and transparency to regain customer trust.
The bank made the right decision to settle with customers who had not just been defrauded by being saddled with unwanted auto insurance and payments they could not make but were subjected to the humiliation of having their vehicles repossessed. This class action lawsuit has helped these affected customers obtain compensation for their losses and hold the bank accountable for its unethical and unlawful behavior.
