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Wells Fargo Tanks as Car-Loan Problems Sully an Already Tarnished Brand

Wells Fargo & Co. (WFC) , working to repair its brand after a fake accounts scandal, is returning $80 million to about half a million car-loan customers who were charged for vehicle insurance they didn't need.

A review prepared for CEO Tim Sloan's management team showed some 490,000 customers were charged for insurance to safeguard the San Francisco-based lender from damage to the vehicle used as loan collateral -- even though the borrowers already had the coverage the bank required, according to a statement on Thursday, July 27. The insurance issues, first reported by the New York Times, occurred from 2012 through 2017.

An additional 60,000 customers in states with specific disclosure requirements may not have been informed about the insurance by the third-party vendor that issued it, Wells Fargo said, and some 20,000 may have defaulted on loans and had their cars repossessed because of the charges.

The lender dropped 2.6% to $53.30 in New York trading on Friday. Following the fake-accounts scandal in September, the shares plunged, but they had recovered and were up 10% through Thursday, still trailing a 13% gain in the S&P 500 over that period.

"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 the bank's consumer lending unit, said in a statement.

Wells Fargo has already started issuing insurance refunds and in...