Nevada Attorney General Adam Paul Laxalt, along with 49 other states and the District of Columbia, announced on Friday a $575 million settlement with Wells Fargo Bank N.A. to resolve claims the bank violated state consumer protection laws.
The conduct resulting in this settlement includes opening millions of unauthorized accounts and enrolling customers into online banking services without their knowledge or consent; improperly referring customers for enrollment in third-party renters and life insurance policies; improperly charging auto loan customers for force-placed and unnecessary collateral protection insurance; failing to ensure customers received refunds of unearned premiums on certain optional auto finance products; and incorrectly charging customers for mortgage rate lock extension fees.
Under the terms of this settlement, Nevada will receive $13,363,512.80. Additionally, Wells Fargo will create a consumer redress review program within 60 days through which consumers who haven’t been made whole by other restitution programs already in place can seek review of their inquiry or complaint by a bank escalation team for possible relief. Wells Fargo will create and maintain a website for consumers to use to access the program and will provide periodic reports to the states about ongoing restitution efforts.
Wells Fargo has identified more than 3.5 million accounts where customer accounts were opened, funds were transferred, credit card applications were filed, and debit cards were issued without the customers’ knowledge or consent. The bank has also identified 528,000 online bill pay enrollments nationwide that may have resulted from improper sales practices at the bank. Additionally, Wells Fargo improperly submitted more than 6,500 renters insurance and/or simplified term life insurance policy applications and payments from customer accounts without the customers’ knowledge or consent.
The states alleged tWells Fargo imposed aggressive and unrealistic sales goals on bank employees and implemented an incentive compensation program where employees could qualify for credit by selling certain products to customers. Other allegations include the bank’s sales goals and the incentive compensation program created an impetus for employees to engage in improper sales practices in order to satisfy such sales goals and earn financial rewards; that these sales goals became increasingly harder to achieve over time; and that employees who failed to meet these goals faced potential termination.
The states also alleged that Wells Fargo improperly charged premiums, interest and fees for force-placed collateral protection insurance to more than two million auto financing customers, despite evidence the customers’ regular auto insurance policy was in effect, and despite numerous customer complaints about such unnecessary placements. Additionally, the states alleged Wells Fargo failed to ensure that customers received proper refunds of unearned portions of optional Guaranteed Asset/Auto Protection (GAP) products sold as part of motor vehicle financing agreements.
Wells Fargo has committed to or already provided restitution to consumers in excess of $600 million through its agreements with the OCC and CFPB as well as through settlement of a related consumer class-action lawsuit and will pay more than $1 billion in civil penalties to the federal government. Additionally, under an order from the Federal Reserve, the bank is required to strengthen its corporate governance and controls, and is currently restricted from exceeding its total asset size.
More information on the redress review program, including Wells Fargo escalation phone numbers and the Wells Fargo dedicated website address for the program will be available on or before February 26, 2019.