Scandal-ridden Wells Fargo & Co. is not out of the woods yet.
The San Francisco-based lender WFC, +0.49% is in the midst of refunding customers for products including pet insurance and legal services that they did not understand or know how to use, The Wall Street Journal reported Thursday, citing people familiar with the matter.
The bank, which is still recovering from a major scandal when it was discovered to have opened more than 3 million accounts without customer knowledge or approval, is refunding tens of millions of dollars for the products, which were added to hundreds of thousands of accounts, said the Journal.
Wells Fargo charged monthly fees for these add-on products that are now being investigated by the Consumer Financial Protection Bureau. The probe is focused on determining whether customers were deceived, were aware of the products and charges and had the ability to cancel them.
Wells Fargo is “reviewing add-on products sold to consumers by the bank or its service providers and if issues are found during this review, we will make things right with customers in the form of refunds or remediation,” Wells Fargo spokeswoman Catherine Pulley told the paper. The bank is “working with our regulators on the ongoing review.”
Just last week, the San Francisco-based bank disclosed a $619 million charge in its second-quarter earnings to refund customers who were overcharged in its foreign exchange, wealth-management and auto- and mortgage lending units.
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In April the bank agreed on a $1 billion settlement with the CFPB and the Office of the Comptroller of the Currency for failures in its risk management practices. That came after the Federal Reserve in February took the highly unusual move of restricting the size of the bank’s balance sheet, also for its failure to adequately manage risk.
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To be sure, Wells Fargo is not the only bank to land in hot water over add-on products. Citigroup IncC, -1.05% and Bank of America Corp.BAC, -1.26% paid more than $700 million each in fines in 2015 and 2014 for similar behavior.
Wells Fargo said in a securities filing last August that it was reviewing add-on products, including identify theft and debt-protection products and said it has started remediation efforts for those customers impacted. The bank hired Ernst & Young to help with the review by scrutinizing 15 to 20 of the roughly 85 different add-on products that were offered.
Some products, such as homeowners insurance or car insurance, were viewed as appropriate, while others such as the pet insurance mentioned above were not.
Insurance products are proving the most difficult to sort out because the bank uses about a dozen different vendors, including Allstate Corp. ALL, -2.16% American International Group Inc. AIG, -2.12% and Chubb Ltd. CB, -1.37%
Wells Fargo shares were down 0.2% Thursday, and have fallen 6.9% in 2018. while the S&P SPX, -0.22% has gained 4.9% and the Dow Jones Industrial Average DJIA, -0.35% has gained 1.5%.
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