Wells Fargo is working on plans to refund tens of millions of dollars to client tied to sales of add-on products as varied as pet insurance and legal services, which were added to their accounts without their full understanding and entailed monthly fees, according to a story in Thursday’s Wall Street Journal.
The Consumer Financial Protection Bureau is looking into the issue, the paper says, as is Wells Fargo, which stopped selling these products in mid-2017.
The news comes less than a week after the bank released its fourth-quarter earnings and explained that it would spend $114 million to refund wealth-unit clients who had been overcharged over the last seven years, $171 million to compensate foreign-exchange clients and $334 million tied to car loans and mortgages.
“As previously disclosed …. we are 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,” the company said in a statement. “We are working with our regulators on the ongoing review.”
Some details about this review and concerns with the Wealth & Investment Management unit, which includes Wells Fargo Advisors, came to light on March 1 in a 10-K filing with the Securities and Exchange Commission.
The filing shows that Wells Fargo has been focusing on problematic fee calculations tied to some fiduciary and custody accounts and whether some referrals and recommendations affecting 401(k) rollovers were “inappropriate.”
The bank was informed by regulators about issues with its add-on products in June 2015, according to people who spoke to the Journal, which says Bank of America and Citigroup each paid over $700 million to settle matters involving add-ons several years ago.
Wells Fargo worked with Ernst & Young to review some 15 to 20 products, the Journal says, out of up to 85 different add-ons, and some clients received refunds. The bank disclosed the review of add-ons, like those focused on debt protection and identity theft, in August 2017.
Client assets in Wells Fargo’s wealth group total $1.9 trillion and have been steady or growing over the past year or so. The number of financial advisors as of June 30, though, is 14,226 — down 860, or about 6%, from September 2016.
That’s when the bank’s fake-accounts scandal led to a $185 million fine from the CFPB; an estimate of the number of unauthorized deposit and credit-card accounts opened since 2009 stood at as many as 3.5 million (as of August 2017).
— Check out Wells Fargo Agrees to $5M SEC Settlement on ThinkAdvisor.