Wells Fargo gives up California insurance license over renters insurance violations
Wells Fargo is prohibited from selling or brokering personal insurance in the state of California for at least three years as part of a settlement with the state over allegations that the bank signed customers up for renters and life insurance products without their knowledge.
The settlement with the California Department of Insurance stems from the bank’s fake accounts scandal, in which the bank was fined $185 million by the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the city and county of Los Angeles for former employees opening as many as 2.1 million accounts without authorization in order to get sales bonuses.
Subsequent investigations and disclosures led to the California Department of Insurance accusing Wells Fargo of allegedly signing up approximately 1,500 California customers for renters or life insurance policies that they did not ask for.
Now, over a year after the CDI leveled those allegations, Wells Fargo and the state are settling the charges.
Under the terms of the settlement, Wells Fargo must not conduct any new insurance business in the state through the terms of its existing insurance licenses, which are set to expire in 2020.
Additionally, Wells Fargo has agreed to not apply for a new insurance license for at least two years beyond the term of its existing license, meaning the bank can’t apply for a new license until at least 2022.
But even it does ever decide to reapply for an insurance license, the bank will face a seven-figure fine.
As part of the settlement, Wells Fargo must immediately pay a fine of $5 million. And if the bank ever tries to obtain a new insurance license, it will be required to pay an additional $5 million fine. The CDI may also simply decline Wells Fargo’s application, should it ever file for one, the department said.
Wells Fargo has also provided restitution to all California consumers who were charged premiums, bank fees and other direct monetary losses connected to the unauthorized insurance policies, the CDI said.
This settlement is also separate from the bank’s recent $575 million settlement with all 50 states over its various scandals of the last few years.
The settlement covers allegations that between 2008 and 2016, Wells Fargo customers were issued approximately 1,500 insurance policies without their knowledge or permission.
In some cases, Wells Fargo employees allegedly told consumers to enter their personal information on a policy application in order to receive an insurance quote, but later submitted the application to the insurer to purchase the policy without the consumer’s permission, the CDI said.
According to the CDI, between 2008 and 2012, Wells Fargo allegedly caused more than 1,250 renters insurance polices to be opened up through American Modern Insurance Group without customers’ knowledge.
The CDI complaint states that AMIG notified Wells Fargo in 2011 that it was receiving complaints from customers who claimed they never signed up for renters insurance. Wells Fargo allegedly told AMIG that it was handling the issue, but unauthorized policies continued to be issued until September 2012, when AMIG ceased participating in the insurance program.
It should be noted that Wells Fargo announced in late 2017 that it is exiting the personal insurance business altogether. According to the bank, it offered auto, homeowners, renters and umbrella personal insurance products to consumers but planned to exit that business by the first quarter of 2018.
Regardless, the bank can’t do insurance business in its home state until at least 2022.
“The Department of Insurance’s investigation found that Wells Fargo was signing up and charging customers for insurance without their consent,” said California Insurance Commissioner Dave Jones. “Banks and other financial institutions should never be allowed to prey on their customers’ trust without being held accountable.”
HousingWire contacted Wells Fargo for a statement on the California matter, but as of publication, the company has not responded. This article will be updated should the bank respond.
Published at Thu, 03 Jan 2019 22:09:00 +0000