Wells Fargo & Co. (NYSE: WFC) has agreed to pay at least $385 million to settle a lawsuit after saddling millions of customers with auto insurance that they neither needed nor wanted.
The lawsuit, initially filed in a California federal court in 2017, alleged that Wells Fargo purchased collateral protection insurance from National General Insurance Co. and then placed that insurance on borrowers' accounts. Wells Fargo charged interest each month on the insurance premium before applying payments to a customer's principal balance. That ensured the bank's CPI charges were covered first, according to the lawsuit.
National General also paid unearned commissions as kickbacks, meaning the charges on a borrower's account were more expensive than necessary, the lawsuit stated.
Wells Fargo and National General combined will pay out at least $393.5 million, plus attorneys' fees, in the settlement. That includes: $385 million from Wells Fargo, plus another $1 million for certain customers; and $7.5 million from National General.
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