Editor’s note: On July 27, CEO Tim Sloan sent the following companywide message.
On July 27 Wells Fargo made an important public announcement about the steps we are making to build a better auto lending business and to address efforts we are taking to make things right for some customers in regard to our vehicle Collateral Protection Insurance (CPI) Program.
In addition, The New York Times has published an article based on a preliminary report that we commissioned several months ago to help us ensure that we make impacted customers whole.
Customers’ auto loan contracts require them to maintain comprehensive and collision physical damage insurance on behalf of the lender throughout the term of the loan. As permitted under those contracts, Wells Fargo would purchase CPI from a vendor on the customer’s behalf if there was no evidence — either from the customer or the insurance company — that the customer already had the required insurance.
However, in July 2016 we initiated a review of the CPI program in response to customer concerns and determined that certain external vendor processes and internal controls were inadequate. More important, we discovered that those deficiencies inadvertently harmed some of our customers. We discontinued the program in September 2016 and immediately started work, with the help of independent consultants, to ensure that our remediation plan addresses customer situations in a thoughtful way.
Wells Fargo reviewed policies placed between 2012 and 2017 and identified approximately 570,000 customers who may have been impacted and will receive refunds and other payments as compensation. In total, approximately $64 million in cash remediation will be sent to customers in the coming months, along with $16 million in account adjustments, for a total of approximately $80 million in remediation. In some cases we already have refunded customers, and the remainder of the remediation program — which begins in August and concludes by the end of this year — is still being finalized.
Beyond this remediation, we’ve taken multiple steps to strengthen the Dealer Services business. Just this week, Dealer Services announced a new structure and other recent changes include centralizing collections, tightening our credit standards, increasing oversight of third-party vendors, enhancing our risk management practices, and hiring new leaders and team members.
Auto lending is an important business to Wells Fargo because it’s vital for our customers to have access to affordable vehicle financing that enables their everyday lives. Today’s announcement underscores our long-term commitment to the business and to conducting it in the right way.
We are deeply sorry for any harm we caused our customers, who expect and deserve better from us. Situations like this one reinforce the importance of continuing to examine every aspect of our business. We will acknowledge mistakes and take responsibility for our actions. On those days, I appreciate that it sometimes can be challenging to keep up the tremendous effort you make each day for our customers and for our company. I believe in the work you are doing. I believe it’s making a significant difference and that a brighter future lies ahead for all of us as we build a better, stronger Wells Fargo.