Wells Fargo said on Thursday that it would compensate around 570,000 customers with car loans who were harmed by being forced to buy auto insurance.
The bank estimated the total cost at around $80 million.
Auto-loan contracts require customers to have comprehensive insurance for potential damage, and the bank was permitted under the contracts to buy that coverage and pass on the cost if there was no evidence it had been purchased elsewhere, Wells Fargo noted in the statement on Thursday.
But it added that its “internal controls were inadequate,” with customers charged insurance premiums even if they were paying for their own vehicle insurance.
“We take full responsibility for our failure to appropriately manage the collateral protection insurance program and are extremely sorry for any harm this caused our customers, who expect and deserve better from us,” Franklin Codel, head of Wells Fargo Consumer Lending, said in the statement.
“Upon our discovery, we acted swiftly to discontinue the program and immediately develop a plan to make impacted customers whole,” he said.
The overcharging of customers for auto insurance was first reported by the New York Times on Thursday.
That article, citing a 60-page internal report prepared by consulting firm Oliver Wyman, said that Wells Fargo required a much larger number of customers — more than 800,000 — who took out car loans to buy auto insurance they did not need.
The cost of the unnecessary insurance pushed around 274,000 customers into delinquency and resulted in nearly 25,000 wrongful vehicle repossessions, the article said, citing the internal report.
The internal report examined insurance policies sold to Wells Fargo customers from the beginning of 2012 through mid-2016, the article said, noting the practice began as early as 2006 and continued through September of 2016.
Wells Fargo’s mea culpa over the improper auto insurance sales marked another black eye for the bank.
In September, Wells Fargo reached a $185 million settlement with regulators over creating what the bank then said could be as many as 2.1 million accounts in customer names without their permission.
Workers created the accounts to meet the bank’s aggressive sales quotas to enroll customers in multiple programs.
Since then, former CEO John Stumpf has left the bank and a handful of other executives have departed as well. Wells Fargo recently announced another settlement — this time $142 million to take care of a class-action lawsuit.
The Wells Fargo board recently decided to claw back more money from Stumpf and Carrie Tolstedt, the former head of the community bank unit head, where the scandal unfolded.
—CNBC’s Jeff Cox, Wilfred Frost and Dawn Giel contributed to this article.