Wells Fargo Class Action: Auto Loan Borrowers Charged for Unnecessary Insurance

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Wells Fargo & Company and Wells Fargo Bank NA have been hit with a class action lawsuit alleging they needlessly added automobile insurance coverage to car loan bills.

“For more than a decade, Defendants, together with auto insurance giant National General Insurance Company (‘National General’), engaged in a scheme to bilk millions of dollars from unsuspecting customers who were forced to pay for auto insurance they did not need or want,” plaintiff Paul Hancock alleges in the Wells Fargo auto insurance class action lawsuit.

Hancock reportedly filed the Wells Fargo class action lawsuit after it was revealed that more than 800,000 car loan customers paid for auto insurance policies that were unnecessary. Of these customers, nearly 250,000 were pushed into delinquency, and close to 25,000 of these customers experienced unlawful vehicle repossessions, Hancock alleges.

The Wells Fargo class action lawsuit notes that these new allegations come in the wake of a massive Wells Fargo scandal that resulted in a $142 million settlement over allegations Wells Fargo secretly opened millions of accounts that customers did not request. Wells Fargo will also pay $185 million in civil penalties to the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, and the Los Angeles City Attorney’s Office over the allegations of opening fake accounts.

The automobile insurance policies that are challenged by the Wells Fargo class action lawsuit are commonly referred to as Collateral Protection Insurance. These types of policies are similar to insurance policies that are often taken out by car owners to cover the cost of any vehicle damage.

“Ordinarily, if proof of auto insurance was not received by Defendants’ CPI provider, in this case National General, notices were required to be sent to borrowers in order to prompt them to obtain the required coverage,” the Wells Fargo class action lawsuit states.

However, neither Wells Fargo nor National General allegedly took steps to determine whether their customers were covered by auto insurance—or ignored the fact that some customers were insured. Instead, the defendants allegedly imposed unnecessary insurance coverage and automatically deducted the cost of the insurance from customers’ bank accounts, along with the expected principal and interest payments.

These insurance policies imposed by the defendants were not only unnecessary, they were also more expensive than borrowers’ already-obtained coverage, the Wells Fargo class action lawsuit alleges. In return, Wells Fargo allegedly obtained a kickback from National General, providing financial incentive to “unlawfully churn these unneeded and unwanted policies.”

To make matters worse, Wells Fargo’s failure to disclose these allegedly unlawful auto insurance deductions and the resulting automatic deductions from customers’ bank accounts often caused the customers to face financial hardship, including account delinquencies, overdrawn payment accounts, increased interest rates, repossessed vehicles and damage to their credit, according to the Wells Fargo class action lawsuit.

Even when customers complained about the unnecessary insurance coverage and charges, Wells Fargo reportedly refused to remove the unlawful charges.

“Borrowers were forced to pay the charges in order to maintain their accounts in good standing, avoid further late fees and interest charges, and avoid repossession of their vehicles,” Hancock alleges in the Wells Fargo class action lawsuit.

Hancock filed the Wells Fargo class action lawsuit on behalf of himself and a proposed Class of consumers who obtained an auto loan from the Wells Fargo defendants and were required to pay for a Collateral Protection Insurance policy.

The plaintiffs are represented by Roland Tellis, Daniel Alberstone, Jonas Mann and Mark Pifko of Baron & Budd PC.

The Wells Fargo Auto Insurance Class Action Lawsuit is Paul Hancock v. Wells Fargo & Co., et al., Case No. 3:17-cv-04324, in the U.S. District Court for the Northern District of California.

UPDATE: On April 20, 2018, a group of plaintiffs have asked a California federal judge to deny a motion by Wells Fargo and National General Insurance to dismiss a consolidated class action lawsuit accusing them of charging auto loan borrowers for unnecessary collateral protection insurance (CPI).

UPDATE 2: On June 6, 2019, 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.

UPDATE 3: August 2019, the Wells Fargo auto loan insurance class action settlement is now open. Click here to learn more.