Wells Fargo is still trying to recover from its latest scandal, but another revelation shows that the scrutiny will not end anytime soon. Wells Fargo is already in trouble for making fake bank accounts and signing people up for insurance they don’t need. Now the New York Times reveals that they’re under investigation for not issuing refunds to consumers who paid off their loans early.
The latest inquiry, by officials at the Federal Reserve Bank of San Francisco, where the bank has its headquarters, involves a different, specialized type of insurance that is sold to consumers when they buy a car. Called guaranteed auto protection insurance, or GAP, it is intended to protect a lender against the fact that a car — the collateral for its loan — loses significant value the moment it is driven off the lot.
GAP insurance, also known as guaranteed asset protection, makes up that difference for a lender if, for instance, a car is stolen before the loan is paid off. Regular car insurance typically covers only the current market value.
Because Wells Fargo is a large auto lender, tens of thousands of customers may have been affected by the bank’s actions on GAP insurance.
The fact that so many scandals are mounting so quickly is a sign that Wells Fargo is deeply messed up—and it’s getting increasingly harder to ignore. MarketWatch notes the growing downward cycle:
...[T]he bank notified the Securities and Exchange Commission that the number of unauthorized bank accounts it had created could be much higher than previously reported, sending shares tumbling.
In light of the insurance problems, The Wall Street Journal reported that the Office of the Comptroller of the Currency, one of Wells’ regulators, was considering taking additional action against the bank.
And New York Attorney General Eric Schneiderman subpoenaed Oliver Wyman, a consultant engaged by Wells to identify problematic practices, like the auto insurance charges.
Now that the scandals are hitting them where it hurts—their pockets—Wells Fargo is trying to do damage control. According to CNBC, they’re now promising to be more transparent. In an official statement, they wrote:
Our top priority is to rebuild trust, and this work includes an ongoing effort to identify and address other areas or instances where customers may have experienced financial harm. We remain focused on making things right for our customers, team members, community partners and shareholders and on building a better Wells Fargo.
Rebuilding trust? Good luck with that.