ESSEX COUNTY, NJ — New Jersey will get nearly $17 million as part of a multi-state settlement with corporate giant Wells Fargo Bank after the company allegedly cheated its Garden State customers for more than a decade, prosecutors announced Friday.

Attorney General Gurbir Grewal said that Wells Fargo has agreed to pay $575 million – including attorney fees and other payments – to 50 states and the District of Columbia. The $17 million payout to New Jersey is the sixth highest amount recovered among all jurisdictions participating in the settlement.

The massive payout agreement comes less than a year after a flurry of government bodies in Essex County pulled their funds from Wells Fargo bank in protest of its alleged predatory lending and aggressive foreclosure practices (read more below).

According to the New Jersey Office of the Attorney General (NJOAG), here are some of the alleged consumer protection violations that led to Friday’s settlement with Wells Fargo:

  • “Opening millions of unauthorized accounts and enrolling customers into online banking services without their knowledge or consent”
  • “Improperly referring customers for enrollment in third-party renters and life insurance policies”
  • “Improperly charging auto loan customers for force-placed and unnecessary collateral protection insurance”
  • “Failing to ensure that customers received refunds of unearned premiums on certain optional auto finance products”
  • “Incorrectly charging customers for mortgage rate-lock extension fees”

To date, this settlement represents “the most significant engagement involving a national bank by state attorneys general acting without a federal law enforcement partner,” the NJOAG stated.

Nationwide, the violations total in the millions, prosecutors said.

“Wells Fargo has identified more than 3.5 million accounts where customer accounts were opened, funds were transferred, credit card applications were filed, and debit cards were issued without the customers’ knowledge or consent. The bank has also identified 528,000 online bill pay enrollments nationwide that may have resulted from improper sales practices at the bank. In addition, Wells Fargo improperly submitted more than 6,500 renters insurance and/or simplified term life insurance policy applications and payments from customer accounts without the customers’ knowledge or consent.”

Part of the problem was due to “unrealistic sales goals” that senior managers gave to those below them on the corporate ladder, prosecutors said.

“The states allege that Wells Fargo’s senior management exerted significant pressure on middle management and line employees to generate sales, through the establishment of unrealistic sales goals and an incentive compensation program. These sales goals became increasingly hard to achieve over time, the states allege, and employees who failed to meet them faced potential termination and unfavorable reviews. As a result, employees routinely enrolled customers in checking and savings accounts, credit cards, debit cards, unsecured lines of credit and online bill pay services without their knowledge or consent.”

People who have had cars repossessed may also have been affected by the company’s alleged shenanigans, prosecutors said.

“The states also contend that Wells Fargo employees wrongly charged more than two million auto financing customers premiums, interest, and fees for forced-place collateral protection insurance, even though this insurance duplicated coverage the customers already had in place. As a result, Wells Fargo has agreed to provide remediation of more than $385 million to approximately 850,000 auto finance customers. The remediation will include payments to over 51,000 customers whose cars were repossessed.”

Prosecutors added:

“Wells Fargo also failed to provide proper refunds to auto finance customers who had purchased Guaranteed Asset Protection insurance policies, designed to address situations in which a car buyer/borrower ends up owing more than a vehicle’s value. As a result, the banking giant has agreed to provide refunds totaling more than $37 million to certain auto finance customers.”

In addition, Wells Fargo customers who were hit with rate lock extension fees for their residential mortgages may have been shortchanged, prosecutors said.

“With rate lock extension, borrowers could ‘lock in’ an ostensibly favorable interest rate, for a fee, even if their loans did not close within the defined rate lock period. The states determined that some bank branches were charging rate lock extension fees even when the delay was caused by Wells Fargo, a practice contrary to the company’s policy. The bank has identified and contacted affected consumers and has refunded or agreed to refund over $100 million of such fees.”

Prosecutors said that Wells Fargo has previously entered into consent orders with federal authorities including the Office of the Comptroller for the Currency (OCC) and the Consumer Finance Protection Bureau (CFPB) related to its alleged conduct.

“Wells Fargo has committed to or already provided restitution to consumers in excess of $600 million through its agreements with the OCC and CFPB as well as through settlement of a related consumer class-action lawsuit, and will pay over $1 billion in civil penalties to the federal government,” the NJOAG stated. “Additionally, under an order from the Federal Reserve, the bank is required to strengthen its corporate governance and controls, and is currently restricted from exceeding its total asset size.”

As part of its settlement with the states, Wells Fargo has agreed to implement within 60 days a program through which consumers who believe they were affected by the bank’s conduct, but fell outside the prior restitution programs, can contact Wells Fargo to be reviewed for potential redress.

Wells Fargo will create and maintain a website for consumers to use to access the program and will provide periodic reports to the states about the program’s progress, prosecutors said.

More information on the redress review program, including Wells Fargo escalation phone numbers and the website address will be available on or before February 26, 2019, the NJOAG stated.

“Wells Fargo’s corporate culture led to repeated breaches of its customers’ trust,” Attorney General Grewal said. “This settlement should send a message to all financial institutions that they need to take steps to avoid similar consumer protection violations, because we stand ready to hold the financial industry accountable.”

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