Wells Fargo, Awash in Scandal, Faces Violations Over Car Insurance Refunds
Asked about the regulatory inquiry into GAP insurance at Wells Fargo, Darren Gersh, a spokesman for the Federal Reserve Board in Washington said, “We are focused on ensuring
that the root causes of a firm’s compliance and controls breakdowns are understood and addressed.” He declined to comment on the specifics, adding that “the Federal Reserve Board will take any regulatory and supervisory steps we feel are necessary to ensure the firm’s attention to compliance.”
A failure to refund the insurance money harmed borrowers whose cars were repossessed by
increasing what they owed, a figure that the bank reports to consumer credit bureaus.
“The company has identified certain issues related to the unused portion of guaranteed auto protection waiver or insurance agreements between
the dealer and, by assignment, the lender, which may result in refunds to customers in certain states,” Wells Fargo said in the filing.
Wells Fargo, the scandal-plagued bank, is facing new regulatory scrutiny for not refunding insurance
money owed to people who paid off their car loans early, according to people briefed on the inquiry.
“These and other issues related to the origination, servicing and/or collection of indirect consumer auto loans, including related insurance products, may subject the company
to formal or informal inquiries, investigations or examinations from federal, state and/or local government agencies, and may also subject the company to litigation.”
GAP coverage is similar to home mortgage insurance, which shields lenders against
a default if a borrower loses his or her job and cannot make the payments.
In a separate crisis at Wells Fargo that was exposed last year, bank employees were found to
have created millions of credit card and bank accounts that customers had not requested.