Wells Fargo in fresh trouble over costly auto insurance
29 July 2017
With new revelations surfacing about Wells Fargo & Co enrolling unknowing borrowers for years, in costly auto insurance, the lender has come under added pressure to explain a months-long scandal over sales practices that have harmed millions of US citizens.
The latest news of the bank improperly charging 800,000 borrowers for insurance shocked investors yet again, who pulled the stock down 2.6 per cent yesterday.
Shareholders, analysts, lawmakers and consumer advocates want to know how the situation came about and why Wells Fargo failed to disclose the problems sooner. This comes in the backdrop of existing scandal over fake credit card accounts opened in customers' names without their permission.
"This is a full-blown scandal - again," New York City comptroller Scott Stringer, who oversees public pension funds that hold roughly 11.6 million Wells Fargo shares, told Reuters.
"It's unbelievable, outrageous, sad, and yet quintessential Wells Fargo. This isn't just a corporate debacle. It's caused real human harm."
Stringer called for installing a new independent chair and immediate disclosure more information.
"The problem with disclosing to the marketplace today or several months ago is customers start calling and asking when they're going to get their money," he said. "It's not a great customer experience to say, 'Yeah, we'll get back to you'.''
Meanwhile, earlier this month, Wells Fargo said it had, by mistake, handed over reams of sensitive data about wealthy clients to lawyers for a former employee.
At its Investor Day in May, Wells Fargo executives spoke at length about changes they made since the retail bank accounts scandal, but chose to keep quiet about the auto insurance problem that had come to light internally in July 2016. According to Franklin Codel, one of the executives, he did not think the issue needed disclosure at the time.
''We knew there was going to be a day where we were talking about this in the public domain,'' Codel, head of consumer lending, said yesterday in a phone interview, Bloomberg reported. ''We wanted to be as prepared as we could.''