Class Action: Wells Fargo Pushes Unneeded Auto Insurance

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Wells Fargo faces yet another class action lawsuit, this one alleging the bank forces customers to purchase auto insurance they don’t actually need.

Plaintiff Tianna Membreno alleges in her class action lawsuit that Wells Fargo’s practice of forcing 800,000 customers to pay for excessive auto insurance policies left nearly 300,000 people delinquent on their loans and caused 25,000 vehicle repossessions.

The plaintiff claims the bank forced auto loan customers to purchase additional auto insurance through a third-party vendor, even if they already had insurance.

Membreno says she purchased a vehicle in 2014 with a Wells Fargo loan. She allegedly had her own auto insurance, but Wells Fargo placed an extra policy on her account, charging her an extra $179.67 per month for eight months, in addition to financing fees and late fees.

The plaintiff claims she presented proof of insurance, but Wells Fargo refused to remove the insurance or credit her account. Further, alleges the plaintiff, her car was repossessed because the bank said that she failed to pay for the insurance she did not need.

“Not only were the CPI policies unnecessary, they were more expensive than the coverage borrowers obtained on their own,” alleges the Wells Fargo class action complaint. “These unlawful deductions resulted in account delinquencies, overdrawn payment accounts, increased interest rates, late fees, repossessed vehicles, and damage to borrowers’ credit.”

According to the class action lawsuit, The New York Times revealed in a July 2017 story that Wells Fargo admitted in response to customer complaints, that it had unfairly charged customers for the extra auto insurance. The complaint notes that in response to the story, the head of consumer lending at Wells Fargo admitted to misconduct at the most senior levels of the bank.

The Wells Fargo class action alleges that Collateral Protection Insurance (CPI) auto insurance policies were sold to Wells Fargo customers from Jan. 2012 to July of 2016. However, Wells Fargo’s own review determined that the application of CPI policies were misapplied to customers who had other insurance. As a result, Wells Fargo customers were charged for an extra CPI policy. In some cases, alleges the plaintiff, the extra CPI premium lead to default and repossession of the vehicle.

Well Fargo auto loan customers were required to show proof of insurance and in cases where consumers did not have proof, Wells Fargo was required to send the customer a request to provide that proof. “However, Defendants engaged in a practice of secretly and automatically imposing these CPI policies on borrowers who, in many instances, already had auto insurance,” the Wells Fargo lawsuit states. “Thus, borrowers were paying premiums and interest on redundant policies they did not need or request.”

“The CPI insurance policies coupled with Wells Fargo’s internal rules about the order in which payments are applied to a customer’s account further exacerbated the problem,” alleges the complaint. “When Wells Fargo received a payment on an auto loan account, they applied it in the following order: interest on the auto loan, interest on the CPI insurance, principal on the auto loan, and then premium on the CPI policy.”

This is the second class action to hit the beleaguered bank over the alleged excessive auto insurance policies. This past summer, a class action was filed in federal court in California alleging that Wells Fargo and National General Insurance Company conspired to force auto loan customers to pay for insurance they did not need.

Membreno seeks to represent a nationwide Class of Wells Fargo auto loan customers who were charged for CPI auto insurance as well as a California subclass.

She is seeking damages as well as treble damages, an injunction against Wells Fargo, and an order requiring the bank to disgorge all profit from the alleged insurance scheme.

The plaintiff is represented by Azra Mehdi of The Mehdi Firm PC, and Peter Safirstein of Safirstein Metcalf LLP.

The Wells Fargo Auto Insurance Class Action Lawsuit is Membreno v. Wells Fargo & Company, et al., Case No. 2:17-cv-07561, in the U.S. District Court for the Central 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.