Approximately 800,000 Wells Fargo customers who took out auto loans could have been improperly charged for their insurance. This is the latest scandal from the banking institution, a scandal which sent Wells Fargo stocks downward 2.6 percent on Friday.
Shareholders, analysts, lawmakers and consumer advocates alike all demanded answer about the latest situation. They also want to know why the bank did not disclose the problem sooner, particularly since the financial institution is still recovering from the recent unauthorized deposit and credit card accounts scandal.
As a matter of fact, that is exactly how New York City Comptroller Scott Stringer put it: “This is a full-blown scandal — again,” the public pension funds overseer said. Holding roughly 11.6 million Wells Fargo shares, he goes on to say, “It’s unbelievable, outrageous, sad, and yet quintessential Wells Fargo. This isn’t just a corporate debacle. It’s caused real human harm.”
As such, Stringer immediately called upon the bank to appoint a new, independent chair to address this issue. He also requested the bank should “immediately” disclose more information.
Apparently, Wells Fargo had first become aware of this issue about a year ago. This was during a time when the company’s auto lending business started to receive an unusually high number of complaints, explains head of consumer lending Franklin Codel.
“The problem with disclosing to the marketplace today or several months ago is customers start calling and asking when they’re going to get their money,” he said. “It’s not a great customer experience to say, ‘Yeah, we’ll get back to you.'”
With that, the bank succinctly shut down the auto insurance program, escalating the problem to senior management officials, to the board, and to regulators.
Codel continues, “We take full responsibility for our failure … and are extremely sorry for any harm this caused our customers, who expect and deserve better from us.”
Alas, this is also not the first time Wells Fargo’s auto lending arm has been scrutinized. Just last September, the bank reached a $4 million settlement with the US Justice Department for illegally repossessing vehicles from servicemen and women. And the bank now faces a $190 million regulatory settlement in September. With as many as 2.1 million phony accounts initializing, a pending class action lawsuit could put this number closer to 3.5 million.