San-Francisco based Wells Fargo is agreeing to pay nearly $400 million to settle a class-action lawsuit involving its auto loans. The 2017 class-action lawsuit was filed by loan customers who claimed the bank forced them to pay for lender-placed auto insurance. We outline the details of the case and what the settlement means to Wells Fargo automotive loan customers below.
A lawsuit was filed that alleged that Wells Fargo forced unwanted and unnecessary car insurance on its automobile-loan customers, without a valid legal basis. The parties have reached a $393.5 million class action settlement. Wells Fargo has agreed to pay at least $393.5 million to those who were force-placed into auto insurance. This settlement is $300 million more than Wells Fargo’s original proposal for remediation, according to the motion for preliminary approval.
What are you entitled to?
All Residents of Arkansas, Michigan, Mississippi, Tennessee, or Washington
- If Wells Fargo force placed auto insurance on your car between 2011 and 2016, you are entitled to, among other things, a refund of all premiums and fees for forced insurance and compensation for lost use of those funds.
Residents of Other States Who Had Their Own Car Insurance
- If you were charged for a force-placed auto insurance policy, but had your own auto insurance between 2005 and 2016, you are entitled to, among other things, a refund of all premiums and fees for forced insurance, compensation for lost use of those funds, and adjustments to adverse credit reporting caused by the forced insurance.
Individuals Who Had Their Vehicle Repossessed
- If you fit into one of the first two categories and you had your vehicle repossessed, you may also be entitled to, among other things, a payment of $4,000 for lost use of the vehicle, as well as a refund for repo costs and lost equity in the vehicle (the difference between the vehicle’s Blue Book value and what it sold for at auction).
Others who don’t fit the criteria above
- Wells Fargo has also set aside an addition $1 million to compensate any class members who do not fall under the categories listed above.
For a full list of the settlement benefits, please see the settlement notice
How to receive your settlement:
There is no need to submit a claim form. All class members will receive notice of the settlement using Wells Fargo’s last known contact and settlement checks will automatically be mailed to each class member.
Force-placed or lender-placed insurance is an insurance policy that a bank buys at the borrower’s expense, claiming the right to do so under the loan contract. Lawsuits have already occurred in the mortgage context over force-placed insurance clauses, which allow the bank to take out home insurance policies for consumers who don’t have them, without their approval. The bank then adds the cost of this insurance to the home loan amount, increasing the monthly payment.
As The New York Times reports
, force-placed insurance clauses are “common in the mortgage arena,” but “not as common” for auto loans. The NYT also reported that representatives for Bank of America, Citibank, and JPMorgan Chase said their banks did not force-place insurance for auto loans.
However, the NYT recently reported
that over “800,000 people who took out car loans from Wells Fargo were charged for auto insurance they did not need.” Wells Fargo allegedly forced insurance on these 800,000 people even though they already had their auto own insurance policies. According to the NYT
, the “expense of the unneeded insurance, which covered collision damage, pushed roughly 274,000 Wells Fargo customers into delinquency and resulted in almost 25,000 wrongful vehicle repossessions.”
The NYT obtained these numbers from a 60-page Wells Fargo internal report, written by a management consulting firm for the bank’s top executives.