Wells Fargo Sends 38,000 Apology Letters In Error

Wells Fargo accidentally sent apology letters to 38,000 people in error after the bank was caught foisting auto insurance on more than 800,000 customers who only wanted to take out auto loans.

Tacking insurance onto the loans were part of the bank's "cross-selling" practice of offering products across different segments - which also included opening millions of credit card and bank accounts for people who never asked for them. 

It gets better: the expense of the unneeded auto insurance (which covered collision damage) pushed some 274,000 Wells Fargo customers into delinquency and resulted in almost 25,000 wrongful vehicle repossessions. And the cherry on top: "among the Wells Fargo customers hurt by the practice were military service members on active duty."

The mechanics of the fraud, via the New York Times:

Here is how the process worked: When customers financed cars with Wells Fargo, the buyers’ information would go to National General, which was supposed to check a database to see if the owner had insurance coverage. If not, the insurer would automatically impose coverage on the customers’ accounts, adding an extra layer of premiums and interest to their loans.

When customers who checked their bills saw the charges and notified Wells Fargo that they already had car insurance, the bank was supposed to cancel the insurance and credit the borrower with the amount that had been charged.

In some cases the bank did just that. In most cases, nobody noticed and the scheme continued: "The Oliver Wyman report indicated that many customers appear not to have notified Wells Fargo of the redundant insurance. This may have been because their payments were deducted automatically from their bank accounts and they did not spot the charges."

The bank ended up paying $185 million to regulators and settled a $142 million class-action lawsuit for more than three million fake accounts opened up by Wells Fargo employees to meet sales quotas. 

The 38,000 erroneous letters were allegedly part of a "coding mistake" caught by the vendor responsible for the communications, reports the New York Times

"We will work with our vendor to ensure these customers receive the appropriate communication — including any refunds they're eligible for," said Bank spokeswoman Catherine Pulley, who also confirmed that the bank mistakenly sent a check to a non-customer. 

The bank acknowledged that they signed up hundreds of thousands of customers for auto insurance they did not need - which the bank says they will pay a total of $80 million to make amends to affected customers. 

"We'll continue working very closely with our vendor and we expect the remediation to be substantially complete by the end of second quarter, 2018," said Pulley. 

What's going on at Wells Fargo?

On top of the credit card, bank account, and auto loan "cross-selling" scams, the beleagured bank also offered refunds to for up to 110,000 customers who were unfairly charged fees to lock in interest rates on mortgages

Even the way Wells Fargo is offering the refunds sounds shady:

The Wall Street Journal, citing people close to the process, said the bank planned to send letters to customers informing them that they must opt into the possible refund, and estimates that half or fewer will open their mail and respond. Wells Fargo spokesman Tom Goyda said details of the outreach effort were still being worked out but that it would include follow-up phone calls when appropriate and "not just a one-off mailing." -NYT

In early February, the Fed said it would bar Wells from expanding its assets beyond their end-2017 level until it "sufficiently improves its governance and controls."

The Fed also demanded that Wells replace three current board members by April and a fourth board member by the end of the year. The release says the board of directors must also improve its oversight practices. The bank will not be allowed to grow until the Fed approves a detail plan of action to be submitted by the bank.

"The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers,” Yellen said in a statement. "The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers."

As we wrote several weeks ago, Wells pursued a business strategy that prioritized growth over managing risks and offering sufficient oversight of the firm's lending practices. As a result, the firm cheated customers of its auto-lending division and also overcharged some mortgage borrowers. And that was AFTER the cross-selling scandal mentioned above. The bank is also facing a criminal probe into its foreign-exchange desk, which allegedly overcharged its large corporate clients. The firm also lacked "an effective firm-wide risk management framework in place that covered all key risks." This, the Fed says, prevented the serious compliance breakdowns from being adequately reviewed by the board.

Meanwhile, in January we showed that Wells posted the worst mortgage numbers since the crisis - so maybe the Fed's new "growth restrictions" on the bank weren't needed after all.


NoDebt chunga Tue, 02/13/2018 - 16:00 Permalink

"the bank planned to send letters to customers informing them that they must opt into the possible refund, and estimates that half or fewer will open their mail and respond."

Drawing on my experience from a former life.... make it look like junk mail and you'd be lucky to get a 2% response rate.


In reply to by chunga

chunga JRobby Tue, 02/13/2018 - 16:38 Permalink

It really is. The phone is another one. Probably half the calls I get are unwanted solicitations despite being on the "do not call" list. I called the provider to see about cancelling and they explained my internet service alone would cost more than my "bundle" discount for both.

Today I got a bill for a copay on a dr. visit of Lovey's less than 30 days ago that demanded payment be sent to a billing center 5 states away or it would be sent to a collection agency.

Our health insurance costs us almost $50 a day.

In reply to by JRobby

JRobby DosZap Tue, 02/13/2018 - 16:14 Permalink

They go into convulsions if they don't pass a branch every 8 miles.

(This is due to the TBTF being gifted so many failed banks after "THE CRISIS")

They think little trolls carry their money from branch to branch knowing where they will stop in for some. (In fact, the trolls are here)



In reply to by DosZap

Endgame Napoleon DosZap Tue, 02/13/2018 - 16:25 Permalink

They seem more like the retail financial services, which are beyond busy, with customers pouring through the doors and employees doing 10 things at once all day long. Those are the better jobs in financial services, actually, whereas the call centers are invariably full of cutthroat chicanery and fooling around that most managers put ahead of customers. The busy stores are so busy that errors are not made due to a huge percentage of employees, leaving work all the time in excused gangs of back-watching absentee moms, nor are they places where, when at work, “culture fits” emphasize silly mom-bonding rituals, like Halloween dress-up days or baby-mommy-themed bulletin board decorating contests, over work. Maybe, if those errors were made in the stores, they need to hire more employees, especially if the stores are slammed. They might try hiring a few people over 25, too, even if the employees prefer to have lunch with hip youngsters, like themselves. A little maturity does not hurt, albeit I have seen plenty of middle-aged employees engaging in all of that mom-gang absenteeism / mom cronyism / mom silliness. Some middle-aged employees are more customer-focused and less friend-focused without being mostly family-focused. 

In reply to by DosZap

Disgruntled Goat Tue, 02/13/2018 - 15:55 Permalink

Any word on the disposition of $2T in off-balance sheet SPVs that Wells currently holds? ..... a legacy of the "financial crisis" 10 years ago .... in the same league as the "mark to model" assets that are currently gutting GE .... everything is hidden, until it isnt ....

Endgame Napoleon Slippery Slope Tue, 02/13/2018 - 16:32 Permalink

They either did not emphasize that national data base to look up policies when training employees, or the employees were so busy or otherwise distracted that they forgot to check. They also might be putting intense quota pressure on them. Good salesmen can sell to a quota when they need to, overriding objectons, but when people have longstanding policies in place, that is a different matter. They should have developed a reflexive habit of checking that data base with every sales transaction. Sometimes—oftentimes—companies churn so many employees that most do not even have time to develop good work habits. The job market is a real zoo. 

In reply to by Slippery Slope

LawsofPhysics Tue, 02/13/2018 - 15:56 Permalink

It really is sad that people must do business with these fucks (all primary dealer banks) at some level. I know many people who left BofA and moved their business to Wells.  Big presence in many farming communities. If you are doing business around the world you are going to be forced to deal with one of them.  Not a damn thing has changed, in fact, the "too big to fail" are even bigger and even more present...

Oh well, all those old adages hidden in plain sight...

..power corrupts and absolute power corrupts absolutely...

Eventually all these useless paper/digit pushing middlemen will be turned into something useful, like fertilizer.

In the meantime...

"Full Faith and Credit"

Endgame Napoleon Disgruntled Goat Tue, 02/13/2018 - 16:35 Permalink

Well, credit unions are not nearly as flexible as banks. I saw that when working in credit processing. Their mannerisms are old-fashioned, giving a feeling of security, but if your life is crazy, with long commutes and little time to do anything, a credit union makes it harder to get chores done. Now, if you are a mom in a mom-gang job, where you can take off a ton with no repercussions, sure, do a credit union. 

In reply to by Disgruntled Goat

Cautiously Pes… Tue, 02/13/2018 - 15:58 Permalink

Well, ever since those Wells executives were found guilty and went to jail for falsifying all of those fraudulent savings/checking accounts, they have really cleaned up thei .....

Wait....what?  You mean no one went to jail for outright fraud?  Oh...okay, never mind then.

besnook Tue, 02/13/2018 - 16:09 Permalink

who runs wells fargo? they obviously live under a different legal system than i do. this is the same wells fargo that likes to launder drug money,too, right?

Throck Tue, 02/13/2018 - 16:13 Permalink

Closed my WF account last year. They looked puzzled when I spoke of the abuses. The branch manager said they were not personally responsible. I reminded them that they work for a bank that is and somehow share in the deception by being a representative. The snowflakes were speechless.

surf@jm Tue, 02/13/2018 - 16:49 Permalink

What dope still does business with Wells Fargo?.........

Even California state government has dumped their business........

Just another "Too big to fail" American business, with sovereign immunity........