Automotive borrowers class actions stacking up

Bank charged 800,000 ­people for insurance they didn’t need

By Barbara L. Jones
BridgeTower Media Newswires

MINNEAPOLIS, MN - More scandal from Wells Fargo bank and class actions are piling up and possibly headed for multidistrict litigation treatment. According to the federal court records as of Aug. 14, 107 cases have been filed against Wells Fargo since July 27, although one was filed and closed on the same day.

The Minneapolis firm of Robins Kaplan has brought one of them. Stacey Slaughter is the Minnesota attorney on the case, although only two New York members of the firm would speak publicly about it.

As first reported in the New York Times after an internal report was leaked, more than 800,000 people who financed automobile purchases through the bank were charged for automobile insurance they didn't need. The expense of the unneeded insurance pushed approximately 274,000 customers into delinquency and resulted in almost 25,000 wrongful repossessions, it was reported.

According to the complaint in Ross et al. v. Wells Fargo & Co., et al., filed in the Northern District of California, it is "the latest example of Wells Fargo's recurring practice of defrauding its own customers." Plaintiffs allege that the collateral placement insurance was more costly than market rates.

Wells Fargo earned millions of dollars in interest payments, penalties, fees and kickbacks in the form of commission payments from National General Insurance Co., formerly known as GMAC insurance, the complaint says.

"Wells Fargo's customers, in turn, were subjected to deceptive late fees, insufficient fund charges, wrongful repossessions and downgraded credit scores, even after many customers complained directly to Wells Fargo," the complaint states.

"This ruined people's lives. You find out you have a low credit score because you have this insurance policy you didn't know about," said Robins attorney Kellie Lerner of New York City.

The class in Ross is defined as all borrowers who were charged for collateral protection insurance at a time when the vehicle subject to the loan was covered under a separate policy.

It also names a tying sub-class of persons who obtained a dealer-arranged automotive loan at a dealership at which Wells Fargo was a preferred or primary lender, who were charged for collateral protection insurance when the vehicle was covered under a separate policy.

The first count asserts a violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. sec. 1962 (c)-(d), which provides for actual damages, treble damages and equitable relief.

It alleges the use of interstate commerce in a pattern of racketeering activity and further asserts that the RICO enterprise, referred to in the complaint as the CPI enterprise, is between Wells Fargo Bank, National General Insurance Co. and other affiliated nonparties. The CPI enterprise committed mail and wire fraud in its pattern of racketeering, the complaint claims.

The complaint also alleges a second cause of action under California's Unfair Competition Law, which it says covers any unlawful, unfair or fraudulent business practice, and a third cause of action for unjust enrichment.

The first three counts cover the named plaintiffs and the nationwide class. Two counts are asserted on behalf of plaintiffs and the tying subclass. It alleges that Wells Fargo unlawfully tied its auto loans to the CPI policies underwritten by National General, in an unreasonable restraint of trade that is unlawful under Section 1 of the Sherman Act, 15 U.S.C. sec. 1.

The second, count brought by the tying subclass, is a violation of the Bank Holding Company Act, 12 U.S.C. sec. 1972. It alleges that Wells Fargo extended credit on the condition that the class members purchase insurance in exchange for financing, benefiting by kickbacks, increased interest payments and fees. The complaint seeks treble damages under 12 U.S.C. 1975. sec.


Wells Fargo has apologized for the insurance scandal and announced it would pay $64 million in cash refunds and $16 million in account adjustments to the 570,000 customers it says were affected. That is about $140 per customer. It also announced additional amounts would be available to people whose cars were repossessed.

In an email, Lerner said, "While Wells Fargo announced that it intends to take corrective action in the wake of this latest scandal, our clients are not aware of any effort it has undertaken to directly compensate them for their losses."

Wells Fargo also announced in a regulatory filing earlier this month that it has identified "certain issues" with respect to refunds that are due for unused GAP insurance. It is also under investigation for its practice of freezing and closing accounts it suspected of fraudulent activity.

According to Bloomberg News, "Wells Fargo & Co. is signaling like never before that legal costs might surge," and predicted a hike of about 65 percent in its costs from its projection three months ago.

Published: Mon, Aug 28, 2017