Prudential may press Wells Fargo as account fallout spreads

(Bloomberg) — Prudential Financial Inc., facing regulatory scrutiny and a lawsuit over a sales relationship with Wells Fargo & Co., said it may press its partner to cover costs after halting the offering — another sign the bank has yet to contain the full fallout of its bogus-account scandal.

Prudential “has provided notice to Wells Fargo that it may seek indemnification,” the Newark, New Jersey-based insurer said in a Feb. 17 regulatory filing, referring to their agreement to sell MyTerm life coverage to Wells Fargo customers. Prudential didn’t quantify the sum that it might pursue.

Wells Fargo’s sales practices are being scrutinized on multiple fronts after authorities fined the bank $185 million in September for signing customers up for bank accounts and credit cards without permission. On Wednesday, ProPublica said the firm placed the head of a mortgage-lending unit in Los Angeles, Tom Swanson, on leave while examining allegations some customers were charged to lock in low interest rates when the bank delayed applications.

Prudential suspended MyTerm sales through Wells Fargo in December. The program offered coverage with relatively low death benefits for people who might not otherwise buy policies and was available at kiosks in Wells Fargo branches or online using the bank’s accounts, former Prudential employees said in a lawsuit.

Whistle-blowers

That case, in which the ex-workers say they were fired for blowing the whistle on misconduct, is one of several Prudential headaches from the Wells Fargo relationship. A customer filed a lawsuit seeking class-action status, which a judge dismissed on Tuesday. And regulators from New Jersey and California have announced probes.

“The company has received inquiries, requests for information, a subpoena and a civil investigative demand related to this matter from state and federal regulators,” Prudential said in the filing. “The company has also received a shareholder demand for certain books and records under New Jersey law.”

Wells Fargo’s stock tumbled as much as 20 percent after the scandal erupted last year, then rebounded, touching a record high last week. (Photo: iStock)

Prudential is responding to requests from regulators, according to the filing. The company previously said that the dismissal of former employees was unrelated to the Wells Fargo relationship. The insurer said last year that it would reimburse customers who were charged for insurance that they didn’t want.

Reviewing fees

ProPublica raised the separate concern about Wells Fargo’s mortgage practices last month. Some branches in Los Angeles and Oregon broke with the company’s policy of eating fees to lock in low interest rates when it was at fault for delays in mortgage applications, the publication said in its report on Wednesday, citing current and former employees. Swanson didn’t respond to a message seeking comment.

Wells Fargo is conducting an internal review to ensure it handled rate-lock extensions consistently and with “customers’ best interests in mind,” company spokesman Tom Goyda said, declining to comment on Swanson. “While that process has not been completed and we can’t discuss the results, we want this review to be comprehensive.” The firm may take additional steps and “make things right for customers” as warranted, he said.

Wells Fargo’s stock tumbled as much as 20 percent after the scandal erupted last year, then rebounded, touching a record high last week.

The bank’s leaders have been working since the fines to win back customers’ trust while fielding additional inquiries from authorities including the Department of Labor and the Securities and Exchange Commission. The San Francisco-based lender said Tuesday that it fired the head of its consumer credit-card business and three other senior managers. Former Chief Executive Officer John Stumpf stepped down last year, under pressure from lawmakers.