SAN FRANCISCO – A new federal lawsuit filed in a San Francisco federal court by a Dallas law firm is accusing troubled bank Wells Fargo of racketeering violations and fraud in relation to auto loans.
The bank is apologizing after admitting that it charged its borrowers for auto insurance they did not ask for or need, causing many delinquencies, and in some cases car repossessions.
Dallas law firm Baron & Budd filed the lawsuit accusing Wells Fargo of violating California’s Unfair Competition Law and Indiana’s Deceptive Consumer Sales Act.
The lawsuit, led by plaintiff Paul Hancock, is the latest highly-publicized scandal for Wells Fargo. Hancock and other Wells Fargo customers allege they were charged for auto insurance without their knowledge. Wells Fargo acknowledges that tens of thousands of people wound up in default, which affected their credit scores, and thousands had their cars repossessed.
“The financial harm included inflated premiums, delinquency charges, late fees, repossession costs, increased interest rates, and damage to customers’ credit reports,” the suit says, according to Law360.
The lawsuit seeks unspecified damages, which could be tripled under federal racketeering law, for borrowers nationwide, and in California and Indiana.
In a statement on its website, Wells Fargo admits it may have driven thousands of car buyers into loan defaults and repossessions by charging them for the unwanted insurance. The bank said an internal review of its auto lending found approximately 570,000 clients between 2012 and 2017 may have unwittingly paid for protection against vehicle loss or damage while making monthly loan payments, even though many drivers already had their own policies.
The statement also says Wells Fargo may pay as much as $80 million to affected clients -- with extra money for as many as 20,000 who lost cars, “as an expression of our regret.”
The plaintiffs are represented by Roland Tellis, Daniel Alberstone, Jonas Mann and Mark Pifko of Baron & Budd PC.
Hancock v. Wells Fargo & Co et al. U.S. District Court, Northern District of California, No. 17-04324.