Wells Fargo Facing Difficult Questions As New Abuses Discovered
New revelations were made that Wells Fargo & Co. spent many years enrolling borrowers in expensive auto insurance without the customer’s knowledge or consent. The new discovered sales abuses have put Wells Fargo back under heavy pressure to answer for a scandal over its sales practices that was harmful to millions of people in the U.S.
The most recent news that over 800,000 auto borrowers at Wells Fargo were charged improperly for auto insurance rattled the bank’s investors once again and pushed down share prices on Friday by over 2.6%.
Analysts, lawmakers, shareholders as well as consumer advocates are demanding answers about how this situation had manifested, and why the bank did not make a quicker disclosure of the problems, given the existing upheaval over the phony credit card and deposit accounts that were opened in the names of customers without their consent.
Comptroller of New York City Scott Stringer said this is again a full blown scandal. Stringer oversees the public pension funds for the city, which hold approximately 11.6 million shares of Wells Fargo stock.
Wells Fargo became aware of these potential problems for the first time over one year ago, when its automobile lending division started receiving complaints at an unusually high rate, said its head for consumer lending during a recent interview.
The bank’s program for auto insurance was suspended quickly, and the current problem escalated to the bank’s senior management, the board and regulators. Wells Fargo was planning to delay disclosing this to the public until it was able to notify the affected customers and then reimburse them.
The bank was pushed into issuing its own press release Thursday after a report in the New York Times said that over 800,000 of the bank’s automobile borrowers had been charged for an insurance that was not needed from January of 2012 to July of 2016.
Wells Fargo is planning to return 570,000 customers a combined $80 million.
The most recent revelations echo what took place at branches of Wells Fargo across the U.S. for many years.
Due to being pressure to reach aggressive targets for sales, thousands of sales employees signed customers up for credit card and deposit accounts without the customer’s consent over a number of years.
Analysts on Wall Street expect the damage financially to the bank will exceed the reimbursements of $80 million.
One analyst said the additional cost for insurance pushed more than 274,000 borrowers into being delinquent and led to a minimum of 20,000 wrongful auto repossessions.