New York (CNN Business)Wells Fargo executives were warned that the bank’s auto insurance program was harming customers four years before it was shut down, according to a lawsuit.
Wells Fargo admitted last year to charging hundreds of thousands of borrowersfor auto insurance they didn’t need. Some customers even had their vehicles repossessed because of the needless charges.
Members of Wells Fargo’s executive risk management committee were alerted in April and July 2012 to “critical issues” about the insurance program known as collateral protection insurance, or CPI, a complaint unsealed by a judge on Monday alleges.
After an internal review, the troubled bank said it found that 870 customers were erroneously denied mortgage changes, with 545 of them losing their homes as a result of the error. The bank first reported the mistake in August, but said only 645 eligible borrowers were denied and of those, 400 lost their homes. The bank added that it had fixed the glitch and put $8 million aside to compensate borrowers this summer, but it hasn’t updated that number since admitting more customers have been impacted.
Reuters, which first reported the news, cited an underwriting error that internally prompted the bank to reject home loan modifications instead of helping them.
In an email to FOX Business, Tom Goyda, a Wells Fargo spokesperson said: “We’re very sorry that the errors occurred and have assigned a single, dedicated point of contact to ensure that each customer is engaged with and assisted individually.”
ON THE CAMPAIGN trail, Donald Trump frequently pledged to “dismantle” the Dodd-Frank financial reforms passed in the wake of the 2008 financial crisis. On Wednesday, with the Federal Reserve’s release of a proposal to roll back capital and liquidity requirements, he caught his big whale.
Those requirements, imposed by the Dodd-Frank Act, were put in place to ensure that critical financial institutions could weather economic storms. The liquidity ratio was only finalized in September 2014. And yet, just four years later, on October 31, the Federal Reserve announced proposed changes that would reduce liquidity requirements by almost a third for banks such as Capital One and Charles Schwab with assets of $250 billion to $700 billion. Smaller banks would have even fewer restrictions.
In the lone dissent on the Fed’s four-member board, Lael Brainard said she could not support the proposal, which, among other things, would “weaken the buffers that are core to the resilience of our system.”