Nevada Attorney General Adam Paul Laxalt, along with 49 other states and the District of Columbia, announced a $575 million settlement with Wells Fargo Bank N.A. to resolve claims that the bank violated state consumer protection laws. The conduct resulting in this settlement includes opening millions of unauthorized accounts and enrolling customers into online banking services without their knowledge or consent; improperly referring customers for enrollment in third-party renters and life insurance policies; improperly charging auto loan customers for force-placed and unnecessary collateral protection insurance; failing to ensure that customers received refunds of unearned premiums on certain optional auto finance products; and incorrectly charging customers for mortgage rate lock extension fees.
Wells Fargo has identified more than 3.5 million accounts where customer accounts were opened, funds were transferred, credit card applications were filed, and debit cards were issued without the customers’ knowledge or consent. The bank has also identified 528,000 online bill pay enrollments nationwide that may have resulted from improper sales practices at the bank. Additionally, Wells Fargo improperly submitted more than 6,500 renters insurance and/or simplified term life insurance policy applications and payments from customer accounts without the customers’ knowledge or consent.
“My Bureau of Consumer Protection protects Nevadans from deceptive practices, and is proud of this comprehensive settlement that holds Wells Fargo accountable for its actions and results in more than $13 million for the State of Nevada,” said AG Laxalt. “To date, this settlement represents the most significant engagement involving a national bank by state attorneys general acting without a federal law enforcement partner.”
The states alleged that Wells Fargo imposed aggressive and unrealistic sales goals on bank employees and implemented an incentive compensation program where employees could qualify for credit by selling certain products to customers. Other allegations include that the bank’s sales goals and the incentive compensation program created an impetus for employees to engage in improper sales practices in order to satisfy such sales goals and earn financial rewards; that these sales goals became increasingly harder to achieve over time; and that employees who failed to meet these goals faced potential termination and career-hindering criticism from their supervisors.
The states also alleged that Wells Fargo improperly charged premiums, interest and fees for force-placed collateral protection insurance to more than two million auto financing customers, despite evidence that the customers’ regular auto insurance policy was in effect, and despite numerous customer complaints about such unnecessary placements. Additionally, the states alleged that Wells Fargo failed to ensure that customers received proper refunds of unearned portions of optional Guaranteed Asset/Auto Protection (GAP) products sold as part of motor vehicle financing agreements. Finally, Wells Fargo is alleged to have improperly charged residential mortgage loan consumers for rate lock extension fees even when the delay was caused by Wells Fargo, a practice contrary to the bank’s policy.
Wells Fargo has previously entered consent orders with federal authorities–including the Office of the Comptroller of the Currency (OCC) and the Consumer Financial Protection Bureau (CFPB)–related to its alleged conduct. Wells Fargo has committed to or already provided restitution to consumers in excess of $600 million through its agreements with the OCC and CFPB as well as through settlement of a related consumer class-action lawsuit and will pay over $1 billion in civil penalties to the federal government. Additionally, under an order from the Federal Reserve, the bank is required to strengthen its corporate governance and controls, and is currently restricted from exceeding its total asset size.
Under the terms of this settlement, the State of Nevada will receive $13,363,512.80. Additionally, Wells Fargo will create a consumer redress review program within 60 days through which consumers who have not been made whole by other restitution programs already in place can seek review of their inquiry or complaint by a bank escalation team for possible relief. Wells Fargo will create and maintain a website for consumers to use to access the program and will provide periodic reports to the states about ongoing restitution efforts.
Wells Fargo has also agreed to:
- Provide remediation of more than $385 million to approximately 850,000 auto finance customers. The remediation will include payments to over 51,000 customers whose cars were repossessed;
- Provide refunds totaling more than $37 million to certain auto finance customers; and
- Identify and contact affected consumers. Wells Fargo has already refunded or agreed to refund over $100 million of such fees.
More information on the redress review program, including Wells Fargo escalation phone numbers and the Wells Fargo dedicated website address for the program will be available on or before February 26, 2019.
All 50 states and the District of Columbia are participating in this multistate settlement. Senior Deputies Attorney General Sheri Ann Forbes, Lucas Tucker, Laura Tucker, and Deputy Attorney General Michelle Newman of the Attorney General’s Bureau of Consumer Protection represented Nevada in this matter.