Regulators in the U.S. are preparing sanctions for Wells Fargo for being paid commissions on auto insurance policies that it helped force on over 500,000 drivers, said people who have direct knowledge of the issue.
Well Fargo in July blamed a third party vendor for the wrong layering of insurance policies on auto borrowers at the bank. Wells Fargo did not say it had been given payouts when the policies were written.
The fact Wells Fargo could profit from that insurance program would form new sanctions against it, said those that are knowledgeable about the matter.
The penalties would be the most recent of a scandal of how it treated its customers that has taken hold of the third largest national lender
The OCC or Office of the Comptroller of the Currency, the primary regulator for Wells Fargo, has asked the bank which executives were aware of the payments and if they should have been stopped at an earlier date.
Wells Fargo does not make comments on matters that are regulatory, said a spokesperson for the bank. The bank was paid commissions from its insurance partners in a program that ended 2013, said the spokesperson.
We are upset about harm that has been caused and are focused on the work to complete the remediation process of the bank.
The auto insurance problems at Wells Fargo stem from a type of policy drivers were required to carry when borrowing money to purchase their vehicle. It pays the bank when a vehicle is destroyed or stolen.
Wells Fargo had a requirement of drivers carrying their own policies, but could force-place policies on borrowers that let their insurance lapse.
Insurers who were working for Wells Fargo pushed these policies onto over 570,000 clients who had coverage already and that delivered profits to the lender.
Wells has been investigating the abuses of auto insurance as far back as 2005 and it estimates that it will have to refund as much as $145 million to its borrowers, and will have to adjust its account balances by as much as $37 million. That is up from the initial estimate for a cost of more than $80 million.
In September of 2016, the OCC joined regulators when it ordered the bank to pay out $190 million after employees created phony accounts in customers’ names to boost sales artificially.
That settlement started over one year of more scrutiny and new revelations of other bank abuses against customers.