Wells Fargo To Settle Forced Home Insurance Class Action Suit

Force-placed insurance burdens homeowners with unnecessary debt while letting banks profit from questionable financial practices and arrangements. It’s no surprise that class action lawsuits have sought to bring some of the sixty-odd banks suspected of forcing insurance on customers to account. Those lawsuits have been met with well-deserved success, too – last month CitiBank agreed to a $110 million settlement over the company’s force-placed insurance policies, while the end of 2013 saw a $22 million settlement between JPMorgan Chase and homeowners who claimed they were forced to carry excessive flood insurance.

As part of the settlement, Wells Fargo reportedly agreed to pay back eleven percent of force-placed insurance premiums.

Last week, Wells Fargo announced that it, along with Assurant Inc., had agreed a settlement to end a class action lawsuit brought by homeowners who claimed they were overcharged for force-placed insurance. The suit was filed in Florida federal court and, though the settlement amount was undisclosed, court documents state that “significant monetary relief’ will be paid to customers.

The settlement comes after Wells Fargo customers accused the bank of charging inflated premiums on its force -placed insurance policies and getting “kickbacks” from insurance companies, such as Assurant. Plaintiffs alleged that the bank allowed insurance companies to issue force-placed insurance policies automatically when a borrower’s voluntary payments fell behind, and that high premiums on the new coverage were then paid by Wells Fargo back to the insurer. Lead plaintiff Ira Marc Fladell added that Assurant would then pay a part of this back to Well Fargo as “commission,” making the entire scheme “highly profitable.”

As part of the settlement, Wells Fargo reportedly agreed to pay back eleven percent of force-placed insurance premiums it received before March 24, 2012. Customers who paid premiums after this date will be able to receive seven percent. The settlement also includes injunctive relief that bans Wells Fargo from accepting force-placed insurance commissions for five years. Assurant will also be prohibited from providing commissions for the same period.

Before the settlement can be approved, it needs to be presented to the court – and this should happen on Thursday.

Force-placed insurance schemes can affect all types of coverage, including:

Federal force-placed insurance regulations require this type of coverage to be “reasonable,” and in cases where banks have imposed excessive or even unnecessary insurance, customers are increasingly challenging banks’ policies in court. In some cases, banks have imposed policies with premiums nearly ten times the cost of a regular policy, in clear violation of regulations.

In the Wells Fargo settlement, the company will now be forced to use the last-known hazard insurance amount as the basis for lender-placed insurance on a homeowner’s loan. It’s good for customers, and ultimately good for the banking industry, bringing about a level of transparency and fairness that was clearly lacking before. Now we just have to hope that other banks still carrying out these illegal policies will be forced to tame their own greed and unethical practices.

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About The Author

Emerson J. Parker

Senior Editor of Maxim Journal and Crypto Junkie

3 thoughts on “Wells Fargo To Settle Forced Home Insurance Class Action Suit

  1. UPDATE: Wells Fargo climbs to $2 billion fine over faulty mortgages

    The U.S. attorney’s office in California announced Wednesday that it’s fining Wells Fargo $2.09 billion for allegedly mispresenting loan quality for mortgages it made and sold leading up to the 2008 financial crisis.

    The San Francisco-based bank said it will pay the civil penalty but did not admit to liability. According to allegations, Well Fargo originated and sold tens of thousands of residential mortgage loans that it knew contained misstated income information and didn’t meet quality standards, which in turn caused mortgage-backed bond investors to lose billions.

    “Abuses in the mortgage-backed securities industry led to a financial crisis that devastated millions of Americans,” Alex Tse, the acting U.S. attorney for the Northern District of California, said in a statement. “Today’s agreement holds Wells Fargo responsible for originating and selling tens of thousands of loans that were packaged into securities and subsequently defaulted.”
    “We are pleased to put behind us these legacy issues regarding claims related to residential mortgage-backed securities activities that occurred more than a decade ago,” Wells Fargo CEO Tim Sloan said in a statement Wednesday.

    The company also added that it remains focused on its “important role as one of the nation’s leading providers of mortgage financing and on our commitment to expanding sustainable homeownership opportunities for our customers.”

    However, the long-anticipated fine comes as the bank continues to grapple with a scandal involving fake customer accounts that erupted in 2016 as well as other scandals and government investigations over the years.

    What’s more, in April, the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency fined the bank $1 billion over claims of improper mortgage and auto-lending practices.

    1. Very interesting article Emerson. Actually, I cannot believe that Wells Fargo appear to be continually repeating the same practices as they have already been found guilty of, or have at least previously “settled” for a billion dollar sum. Just this past month, Wells Fargo retroactively placed forced flood insurance on my home for a premium of $2,130. I found the coverage myself for $864 (Lloyds of London – hardly a fly-by-night company). The retro-active part is already bad enough. The imposed premium was usury. Best, Michael.

  2. Please Note:
    A spokesman for Wells Fargo, Tom Goyda, said the bank strongly denied the claims made in the lawsuits and particularly disputed how the complaints characterized the bank’s actions.

    Wells Fargo does contend that the borrowers and the bankruptcy courts were notified about the change of insurance forced upon homeowners at sometimes more than 3 times the regular price. Also commenting, that IF cows could fly there would be much less traffic and more Autobody shops.

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