Wells Fargo just can’t seem to stay out of trouble these days. Separate from other recent settlements over the years, the latest allegations have cost them not only money, but their license in California as well.
For the next 3 years, the Bank will be prohibited from selling or brokering personal insurance in the State of California. The California Department of Insurance alleges that Wells Fargo signed up approximately 1,500 California customers for renters or life insurance policies without their knowledge or consent. As a result, they are required to pay a $5 million fee and they may not do business in the State of California under their current license, which expires in 2020. Additionally, they have agreed to not apply for another license for another 2 years after that. If they do decide to re-apply in 2022, they will have to pay an additional $5 million fine at that time with no guarantee of reinstatement.
In this case, unknowing customers completed applications under the assumption they would only be receiving a rate quote. The CDI alleges that Wells Fargo took these applications and submitted them to the insurer, resulting in policies being purchased without the customers’ consent. California Insurance Commissioner Dave Jones stated, “Banks and other financial institutions should never be allowed to prey on their customers’ trust without being held accountable.” Force-placing insurance on unknowing customers is a dangerous practice. Not only has the Bank’s reputation been severely tarnished, but the legal ramifications are costing them significantly.
As we mentioned in last year’s post when Wells Fargo first hit the news, Lender’s Risk has options that can alleviate the need to force-place insurance altogether. For example, our Lenders Single Interest (LSI) product eliminates the need to force place or track insurance. LSI protects a lender’s interest in the collateral by securing a loan when the borrower’s loan insurance on the collateral lapses or is cancelled. Coverage is provided on a blanket basis to loans originated on and after the policy effective date. Administration is simple, and there is no requirement to track borrower insurance following loan closing to assure that coverage on the collateral remains in force.
By working with Lender’s Risk, we can help ensure that the appropriate reporting is in place to avoid mishaps, and that transparency in our policies is communicated clearly to avoid misunderstandings and legal ramifications for wrongful practices. Establishing trust with your customers should be at the forefront of your business practices, and at Lender’s Risk, we pride ourselves on maintaining our reputation and integrity so that our business partners can continue to grow their customer base with confidence.
For more information on how you can partner with Lender’s Risk, please speak with an agent by calling 888-600-4436.