Wells Fargo Agrees to $394M Auto Loan Insurance Settlement

Customers accusing Wells Fargo and National General Insurance of tacking on unnecessary auto insurance to boost car loan bills are requesting approval of a $393.5 million settlement.

Negotiations with the companies began in May 2018, and last Thursday the plaintiffs submitted their motion for preliminary approval of the class action settlement.

Wells Fargo already paid $1 billion to the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency in April 2018.

The government alleged that Wells Fargo used improper conduct in auto lending by adding unnecessary insurance to car loans to increase the cost to consumers.

The consumers’ motion requesting preliminary approval of the proposed Wells Fargo settlement deal notes that “negotiations were difficult, protracted, and often spirited.”

The consumers who filed the auto loan class action against Wells Fargo claimed that between 2005 and 2016, Wells Fargo charged customers taking out auto loans for insurance, even if they did not want it.

Allegedly, the billed insurance was collateral protection service. The borrowers go on to assert that National General served as the underwriter for this insurance.

The customers note that the proposed settlement deal would help to better compensate customers who were allegedly not sufficiently compensated by a 2017 remediation plan. The 2017 plan was reportedly only $64 million, and only benefited a smaller number of consumers.

Out of the $394 million in the proposed settlement deal, Wells Fargo will pay $385 million and National General will pay $7.5 million. Up to $36 million will cover the borrower attorney fees, and up to $500,00 will cover attorney expenses.

Expressing that they felt that the settlement deal was a preferable option to continuing litigation, the borrowers said, “should counsel prosecute these claims against defendants to conclusion, any potential recovery could come years in the future at far greater expense.”

Wells Fargo and National General had previously attempted to have the auto insurance class action lawsuit dismissed, a move which the customers successfully fought.

Speaking to the need for further compensation for consumers, the borrowers said “Wells Fargo has largely admitted this misconduct. However, despite paying regulators a $1 billion fine for conduct which harmed Wells Fargo’s customers, Wells Fargo remarkably attempts to prevent such customers from seeking a recovery too.”

The borrowers are represented by Roland Tellis and David B. Fernandes Jr. of Baron & Budd PC, Roman M. Silberfeld, David Martinez, Kellie Lerner, Benjamin D. Steinberg and Aaron M. Sheanin of Robins Kaplan LLP and David S. Casey Jr. and Gayle M. Blatt of Casey Gerry Schenk Francavilla Blatt & Penfiled LLP.

The Wells Fargo Auto Insurance Class Action Lawsuit is In re: Wells Fargo Collateral Protection Insurance LItigation, Case No. 8:17-ml-02797, in the U.S. District Court for the Central District of California.

UPDATE: August 2019, the Wells Fargo auto loan insurance class action settlement is now open.Click here to learn more.

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