David Dayen: Revoke Wells Fargo's Bank Charter

Aug 9, 2017

By David Dayen, via Email alert
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Last week Wells Fargo was caught forcing unwanted insurance on car loan borrowers. This week, they’ve been exposed profiting from a DIFFERENT kind of unwanted insurance:

The latest inquiry, by officials at the Federal Reserve Bank of San Francisco, where the bank has its headquarters, involves a different, specialized type of insurance that is sold to consumers when they buy a car. Called guaranteed auto protection insurance, or GAP, it is intended to protect a lender against the fact that a car — the collateral for its loan — loses significant value the moment it is driven off the lot…

It is not mandatory for car buyers to carry GAP insurance, which typically costs $400 to $600. But car dealers push the insurance, and lenders like it because of the protection it provides. When borrowers pay off the loans early, they are entitled to a refund of some of the GAP insurance premium because the coverage they paid for is no longer needed.

Wells never paid the refunds. It’s hard to keep calling these types of problems mere “oversights” when they pile up. There’s a strategy of neglect at Wells Fargo, where indifference becomes profit. Also the role of a bank is to, you know, be good with counting and distributing money.

In its latest regulatory filing, Wells’ note on Legal Actions is three pages long and includes twelve different open investigations and cases. It says that the firm my have to spend $3.3 billion more than expected just to deal with all the payouts we know about today. As the rest of the industry’s legal risk falls, Wells Fargo’s is rising.

This is why Wells Fargo needs to have its bank charter revoked, and why more people should be making that case. Tossing out the board is a good start, which the Federal Reserve can do today, and which major shareholders can demand. But we don’t have to sit passively and wait for the next revelation about fraud and customer abuse. A take back the charter movement must start today.

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