Car Loan from Wells Fargo Equals Ripoff

dinosaur tracks outside in Red Gulch outside Greybull, Wyoming

Manderson, WY  Hey, I know you really want to hear about what Chaco and I are doing in Wyoming. You want to know all about the dinosaur tracks we saw in the Red Gulch. You want to know how we caught two cutthroat trout on Lake Sibley on lures when everyone else was fishing with worms. You want to know how volunteers are keeping the GeoScience Museum going in Greybull and about the Pyramid Rock in the Shell Canyon. Sorry, maybe another day, I was saving some of my fire on Wells Fargo so that we could just look at what happens to the poor suckers who made the mistake of getting a car loan from this banking version of a criminal enterprise.

dinosaur tracks outside in Red Gulch outside Greybull, Wyoming

They had a number of scams going.

The first had to do with forcing people to get collision insurance when they took out a car loan. Wells Fargo had a practice of doing so, and collision coverage is expensive. The bank determined that it had affected at least 800,000 customers according to an analysis they commissioned themselves. Some reports, including in the New York Times, indicated that the number of victims there could also be higher. Not that it wasn’t bad enough!

By larding on the insurance charges they forced at least 274,000 people, ostensibly customers they cared about and not simply marks in a con game, into delinquency, resulting in 25,000 cars being wrongly repossessed. The bank at last report was still debating how much they were going to pay in restitution.

GeoScience Museum in Greybull

I want you to just step back for a minute though. Big numbers sometimes conceal the individual pain inflicted on each individual victim. 274,000 is a lot of people, and could include friends, relatives, and neighbors living near you. They didn’t go out their front door, and yell that they were being ripped off by Wells Fargo. They probably sulked around thinking they had messed up somehow. Meanwhile their credit was crippled, so they could forget about paying lower interest elsewhere, trying to buy a home or maybe even getting an apartment they would like, and certainly buying another car in the future would be a mountain to climb. And, 25,000 of the cars were wrongly repossessed. I’m sorry to be so old school, but I think 25,000 is a big number of people to hurt as well! How many lost their jobs when they lost their transportation or were forced to move. To Wells Fargo, and perhaps to a lot of policy makers, these are just numbers and the penalty will hardly add up to a rounding error on their annual report and balance sheets, but these are real people who were seriously hurt. They weren’t rich people, but people who had to shrug it off and still try to live and raise families.

But, in the relentless quest for extra pennies regardless of the damage to people, it turns out that Wells Fargo also didn’t mind profiteering on some more insurance scams. This ripoff involved GAP or guaranteed asset protection insurance. As the Times reports:

It is not mandatory for car buyers to carry GAP insurance, which typically costs $400 to $600. But car dealers push the insurance, and lenders like it because of the protection it provides. When borrowers pay off the loans early, they are entitled to a refund of some of the GAP insurance premium because the coverage they paid for is no longer needed.

The Federal Reserve and others are now looking at how Wells Fargo closed the GAP to benefit themselves. When someone did their best to pay off their car loan early, Wells just kept the insurance money rather than refunding the balance as nine states require or crediting the unused insurance portion to balance as all fifty states require. Who knows how many were forced into delinquency or repossession by this scam.

Wells Fargo claims that its compliance and oversight slipped up. It’s fair to ask what compliance, is that the guy who closes the door when the bank executives decide in secret that they can steal some money from their customers without them knowing they are doing it?

If you believe that then I have a 20-year old Suburban that I’m glad to sell you for $50,000, and I know just the place that will give you a car loan if you want to add one ripoff to another: Wells Fargo!

Pyramid Rock in Shell Canyon

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How Can We Get the “Rip Us Off Now” Sign Off Our Back?

student_debtNew Orleans    I just have to wonder why when we are in a period of historic wealth and income concentration at the top, there are so many outfits trying to rip off low-and-moderate income families at the bottom? The hustles keep rolling down on our people like an avalanche.

The Student Debt Project issued a report saying that the average graduate is now leaving school with $29400 worth of debt. Ok, maybe colleges and universities are not rip-off artists, but the evidence is piling up that even if so many of our folks signed the loans willingly, the institutions were predatory, waving a dream with one hand, while pulling out the rug of reality with the other.

Everyone is finally discovering how predatory payday lending is on low-and-moderate income families, as if it were news. Some hope the relatively new, Elizabeth Warren promoted, Consumer Finance Protection Board may zero in on these companies. Their reports are devastating and worth repeating:

 

…of about 12 million payday loans issued across more than 30 states only 15 percent of borrowers could raise the money to repay the entire debt without borrowing again within 14 days. Twenty percent of these borrowers eventually defaulted. Nearly two thirds renewed a loan and were on the hook for fees that could put them on the road to financial ruin; three out of five payday loans were made to people whose loan fees exceeded the amount borrowed.

 

Yes, like student loans, there is no benchmark of affordability being used here.

And, how about auto loans.

Capital One is leading the pack with Wells Fargo right behind in pushing these loans out the door, and, low-and-moderate families are gobbling them up. We made it through the recession on repairs and now in 2014 the old buckets of bolts are just past repair, and people have to have the wheels under them to get to work, school, and wherever. Flooded with money, since banks were not making loans, we have the home financing bubble and securitization schemes coming back along with no interest teasers and high interest balloons creating a new subprime market in auto loans.

 

Wells Fargo, for example, made $7.8 billion in auto loans in the second quarter, up 9 percent from a year earlier with $52.6 billion in outstanding car loans. 17 percent of the total auto loans went to borrowers with credit scores of 600 or less.

 

And, yes, like student loans and payday loans, there is no benchmark of affordability, meaning ability to pay back the loans, being used here.

What does it take to get some real action by the government at the local, state, and federal level to take the “Rip Us Off Now” sign of the back of working families?

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