Beginning in at least in 2009, Wells Fargo teamed up with a home warranty firm to foist a product on unsuspecting mortgage customers, according to a new investigation bubbling up in the Wall Street trade press.
The story was first reported by The Capitol Forum, a paywalled investigative site catering to policymakers and investors, and based on several dozen consumer complaints filed online and with the Federal Trade Commission. Complainants allege that they discovered surprise charges on their mortgage bills for the service, labeled an “optional product,” and found it difficult to get Wells Fargo to remove them.
“I was never contacted … with any offer, they never sent any receipt or contract; but I was billed $43 extra on my mortgage bill by Wells Fargo,” claims one borrower from Herndon, Virginia, who didn’t leave a name. After appearing to rectify the matter, a similar charge appeared again the next month.
An FTC spokesman would neither confirm nor deny whether the commission had looked into the complaints, citing government policy regarding public comments. Such complaints, when they become public, tend to attract class-action attorneys, who suspect the complaints might just be the tip of the iceberg.
Wells Fargo claims they ended the marketing arrangement with the third-party company pushing the warranty service in 2012. But it’s unclear how many borrowers were affected by this charge in the past without knowing; we only have the complaints of those who caught it and were bothered enough to report it.
“It’s hard to put your finger on what’s going on,” said bankruptcy attorney O. Max Gardner, a legendary consumer advocate. “When you think you’ve seen it all, you see this stuff.”
In a statement to The Intercept, a Wells spokesperson hinted that there may be an iceberg there. “Wells Fargo stopped marketing home warranties from American Home Shield, along with other optional products, to our mortgage customers in 2012 and has been discontinuing arrangements through which these products had been billed to customers through their monthly mortgage statements,” the statement reads.
That raises a question attorneys are likely to ask: what “other optional products” were sold? And what does “has been discontinuing” mean? Has it been fully discontinued, or are some customers still getting smacked with bills every month? (If you have a third-party charge on your mortgage statement you didn’t sign up for, email us at [email protected])
Wells said that customers knew what they were buying. “Wells Fargo’s processes for customers who purchased home warranty coverage through American Home Shield included a written or recorded verbal authorization at the time of enrollment,” according to the statement, which added that it would look into any specific complaints.
Meanwhile, we uncovered a cinematic representation of what that “written or recorded verbal authorization” may have looked like:
The exposure could prove another damaging blow to Wells Fargo’s reputation, which has suffered from numerous disclosures in the past couple months — including force-placing collision and guaranteed asset protection insurance on unsuspecting auto loan borrowers, secretly changing mortgage terms for homeowners in bankruptcy, falsifying records to charge mortgage applicants for its own delays in application processing, and stealing from mortgage bond investors to pay legal fees in lawsuits filed by those very same investors.
That, of course, comes on top of the high-profile scandal in which Wells was caught opening accounts for customers — perhaps as many as 3.5 million of them — that they didn’t request in order to hit them for fees.
In this case, Wells worked with the nation’s dominant home warranty company, American Home Shield. Home warranty protection service covers the repair or replacement of major appliances, air conditioning, electrical systems, or other big-ticket items. For a fixed monthly payment ranging from $33 to $69 a month, consumers get access to free service from AHS-preferred contractors. The company sells roughly half of all home warranty plans, according to its parent company’s most recent regulatory filing. It claimed more than $1 billion in revenue last year.
Efforts to get in touch with a representative from AHS ran into a wall of recorded voices. “We are currently experiencing unusually long hold times,” said one recording, though whether the hold time was unusually long is questionable, as Twitter is littered with complaints of wildly long hold times with AHS, or rinky-dink excuses for not covering a service.
Starting at least in 2009, Wells Fargo and AHS entered into a marketing and payment processing agreement. Wells allowed AHS to solicit their mortgage customers to buy home warranty service, through phone calls, junk mail, and inserts in monthly mortgage statements. Wells would then collect the monthly payments for AHS as an additional charge to the mortgage.
According to one borrower from Newark, New Jersey, AHS claimed its junk mail constituted a “binding contract” that automatically finalized if borrowers didn’t reply to turn it down. “No signature, no affirmation and YET it is considered a BINDING CONTRACT??” the borrower wrote.
A homeowner from Eden Prairie, Minnesota, told the FTC in 2011, “I did not reply to this piece of junk mail nor does this company [AHS] have my signature anywhere authorizing these charges to my mortgage account,” the homeowner writes. Though the homeowner canceled the service, more charges continued to show up on monthly statements.
“$49.50 has been taken out of my Wells Fargo mortgage account since Nov 2012,” reads another complaint on the website, Complaint Wire. “I didn’t realize it until I got a ‘thank you for renewing your protection plan’ letter in August 2013.”
A homeowner from Memphis, Tennessee wrote: “Wells Fargo also added $42 for an American Home Shield Warranty… We NEVER asked for or consented to this optional product! We never signed or recieved a contract. Wells Fargo just added it to our automatic draft, de facto.” The homeowner added that AHS and Wells Fargo engaged in finger-pointing when he tried to contest the charges. “Each company blames the other, passing the buck and offering conflicting information.”
On top of this frustration is the fact that AHS has a notorious reputation for not delivering on its promises to fix or replace home items in a timely manner. Customers allege that AHS routinely delays service, denies claims, charges for “uncovered” expenses, and forces customers to spend hours on customer service calls.
Hold times for American Home Shield @AHS_Warranty average about 1 hour. I have the receipts! #BuyersRemorse pic.twitter.com/UO109X5uJJ
— ?#Resistance Eric ? (@_erock) August 2, 2017
It could be bad for business long term. “The Company is involved in a number of judicial, regulatory, arbitration and other proceedings concerning matters arising from the conduct of its business activities, and many of those proceedings expose the Company to potential financial loss,” warns its latest filing with investors.
The filing lists a dozen separate legal actions, but the warranty scandal is not among them. Legal costs could surpass $3.3 billion.
While we were unable to get through to AHS, a spokesman there told Capitol Forum they are looking into the situation:
American Home Shield is committed to providing excellent service and value to our customers. Over the past five years, we have responded to more than 16 million service requests and have paid more than $1.8 billion in repairs and replacements on behalf of our customers. As the largest home warranty company in the nation, we receive and pay more in claims than any other provider in the country.
There are almost always opportunities for improvement in any service business. We actively work to address customer concerns and to understand why and where breakdowns may occur in the service journey, so that we can continue to improve the services we provide to our customers.
With regard to possible FTC complaints involving Wells Fargo customers from 2009 to 2013, we have had insufficient time to research the validity and/or resolution of those complaints, but our practice has always been to work with customers to address complaints as they are raised and to make every effort to resolve those complaints. We are unaware of any unresolved issues along these lines.
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Top photo: Pedestrians pass a Wells Fargo bank branch in lower Manhattan on April 15, 2016 in New York.
[[[ According to one borrower from Newark, New Jersey, AHS claimed its junk mail constituted a “binding contract” that automatically finalized if borrowers didn’t reply to turn it down. “No signature, no affirmation and YET it is considered a BINDING CONTRACT??” the borrower wrote.]]]
If The Intercept would study instead of “emoting” like the left-wing extremists, you’d know that this article is about something called:
“Negative Option Invitation.”
It’s a Deceptive Trade Practice covered under the consumer protection laws on the books of about 47 states.
So let me see if I have this correctly. A junk snail mail that I throw into the trash before opening can legally bind me to a product I have no interest or intent in buying? If it is an illegal practice in 47 states, would a company based in one of the legal states be able to market outside the few that don’t outlaw the practice? Wouldn’t crossing a state boundary bring on Federal intervention in a national sense or is this practice legal at a Federal level? This is really hard to wrap my head around.
You can actually forum shop…
https://en.wikipedia.org/wiki/Lex_loci_delicti_commissi
The lex loci delicti commissi is the Latin term for “law of the place where the delict [tort] was committed”[1] in the conflict of laws. Conflict of laws is the branch of law regulating all lawsuits involving a “foreign” law element where a difference in result will occur depending on which laws are applied.
The term is often shortened to lex loci delicti.
When a case comes before a court and the parties and the causes of action are local, the court will apply the lex fori, the prevailing municipal law, to decide the case. However, if there are “foreign” elements to the case, the forum court may be obliged, under conflict of laws, to adjudicate whether the forum court has jurisdiction to hear the case (see forum shopping).
The court may then be required to apply the choice of law rules to decide the lex causae, the law to be applied to each cause of action.
Sounds like a ponzi scheme.
Yup… Just like Social Security “applications” filed by doctors/hospitals on behalf of new mothers and their children in the maternity ward.
And just think, after Trump continues with his promise to remove all the “red tape” and lessen all these restrictions, how much easier it will be for the big businesses to find more ways to take advantage of their customers. If you think this is bad, just wait until he’s done pulling apart everything that has been put in place that has finally started to bring these types of issues to the forefront. Just check out the latest item republicans are pushing… doing away with class-action lawsuits. With everything else going on in the headlines this is quietly making its way thru the ranks and they somehow successfully sell it to their ignorant supporters that its in their best interest and the idiots keep voting them back in. Republicans will do everything possible to ensure your money is in the pockets of the big businesses and your rights and abilities to potect yourself from them are gone. How does anyone not look at what they were trying to do with healthcare and think that this is a complete disgrace. Pathetic. Open your eyes and ears and look at what this administration is doing for us and who the republican party is truly protecting… the wealthy and corporate America. Trumps one of them not one of us.
Excellent work! Excellent piece! I love the intrepid work of The Intercept. Keep up the good work.
Bankers are like broken records…
Undoubtedly, the crookedest bank in the US. What’s most shocking (or is it?) is that nobody goes to jail. Apparently the Feds think that they will be taught a lesson by having to pay staggering sums in penalties — you know, like 3 or 4 million bucks.
from laundering drug money for mexican cartels(advancing terrorism) to this latest scam. just think bout it: launder drug money and nobody is even charged let alone goes to prison. then we have an average american with a roach in his car ashtray who goes to jail and is fined.
wells fargo could murder someone and only get fined.
banks – like presidents – are above the law. that explains the big donations & the cozy relationships.
We recently refinanced our mortgage but did it with another bank specifically so we could get away from Wells Fargo. After all was said and done, we got a check from Wells Fargo from our “escrow account”. A couple of hundred dollars, but my husband and I never set up an escrow account with Wells Fargo. Now I have to go back and look at all the statements to see what that was all about.
Hey Margarita, while I’d never defend WF for anything they’ve been accused of doing, I think escrows are a pretty standard practice as mortgage companies want to pay your RE Taxes and Insurance (and they collect this money in an escrow throughout the year). If a bill isn’t due, they’ll refund you what hasn’t been paid out to your city tax/or insurance premiums when you move to another lender. I’m sure you already know this, but if not – it’s one thing (hopefully) WF aren’t being dishonest about this too. Cheers, Rob
“With a mortgage escrow account, you have to pay the lender a certain amount each month to cover With a mortgage escrow account, you have to pay the lender a certain amount each month to cover property taxes, homeowners insurance, and private mortgage insurance. (These are collectively called “escrow items.”) The lender then pays for those items on your behalf as the bills come due., homeowners insurance, and private mortgage insurance. (These are collectively called “escrow items.”) The lender then pays for those items on your behalf as the bills come due.” The property tax is likely what is going on, it is typical. The lender estimates property taxes through the life of the mortgage. A refund check usually follows extra payments on your mortgage, which shortens the life of the mortgage. If you don’t have a lot of money in savings, I suggest you save the money, as sometimes the mortgage company requests a payment to replenish the escrow account if it finds it is insufficient. I’m not a banker, but this is my layman’s answer.
In April 2017 I made a large payment to Wells Fargo in the presence of a witness and received a receipt that left ZERO doubt as to the purpose of that payment. Sometime after that, Wells Fargo misappropriated the funds and now they are trying to foreclose on my home, the principal balance of which is 0. I can prove every word I just typed. Anyone wanna watch or report?
Not again!
It is THIS STORY: http://www.alternet.org/story/155442/wells_fargo_has_blood_on_its_hands%3A_desperate_man_commits_suicide_after_shocking_foreclosure_mistreatment — which makes me say that Wells Fargo literally has no reputation to lose. I mean, if I saw ISIS terrorists tossing bags of cash into a getaway car outside one of their scam sites, I wouldn’t say a word. Just, for the love of God, do not let your story end like that one — they don’t care, nobody cares, what happens to their customers, only what happens to them.
Thank you for the link, I’ve added it to my evidence folder. Wells Fargo is pulling the same exact shit with me and it’ll be good to show a judge proof they have a history of fraudulent behavior. Thank you as well for your concern regarding my health. My fighting blood is WAY up, and my attitude is: they have a piece of paper, I have a building. I wish them luck in this battle as they are gonna need it! It would be nice if TI got interested, but far from necessary. I’ve been fighting in the shade my entire life. Thank you most of all for your words of encouragement. I will defeat them not only for me now, but also for Norman and Oriane as well. Should I beat them BIGLY enough I fully intend to reach out to Oriane. Nothing can bring Norman back but maybe a little WF blood money can ease the pain.
I hope you can come up with some kind of legal help that does actual research! I mean, you shouldn’t have to rely on random cites from internet forums to make your case.
After all the revelations of corruption at Wells Fargo, it amazes me that anyone still does business with them. You would think they would have been driven to bankruptcy by now. Wake up people!
Wells Fargo is the de facto mortgage lender in the US. Get a mortgage from a regional bank and it will invariably be bought by them. I have gone out of my way to stay clear of them, only to be a “customer” of theirs again and again. We were involved in a class action suit against them in 2009, when we attempted to refinance the property the new loan would not be finalized until we removed ourselves from the action. -disgusted
These horror stories of how banking. and especially Wells Fargo, extorts spurious fees from customers make me thank the stars for belonging to a credit union on a weekly basis. Then charges are added without any disclosure or recourse adds to the overall corruption of the industry overall. Where are the consumer protectors or agencies tasked with keeping this ‘racket’ from scamming millions from unsuspecting costumers? Thanx for this report!
This is amazing. Just two weeks ago I placed a call to consider them for home products being covered. I had read a number of customer thoughts, then found some complaints against the services (not) provided. Then I spoke to them. Any legal issue is in almost all cases a mandatory “arbitration” resolution. That alone stopped me in my tracks from considering them further. This is one of the practices used by banks like Wells Fargo. Mandatory Arbitration is a way to keep consumers from their rights to resolve in their favor, in my opinion. Avoid it if possible. This language is in contracts used by many banks, etc.
Wells Fargo does it again. I just paid off one of my debts to them but have one more (a mortgage, unfortunately) that has to be paid off before I can escape their clutches. I did check my mortgage/escrow statement to make sure they weren’t taking anything “extra” out. They don’t appear to be, but I wouldn’t put it past them. American Home Shield sucks. I had them for awhile, but when I needed them to repair/replace something, it was an incredible hassle, so I dropped them like a hot potato.
I deplore Wells Fargo’s fraudulent practices! My problem is that I’m Stuck With Them!! Few folks can understand the physical limitations of some of us elderly individuals. Having no car, Wells Fargo is the only bank within over half a mile from where I live…and it’s only three blocks – within walking distance. While I will NEVER be doing any financial transactions with them, such as a loan, I have my checking account there because of access to funds. If there was an alternative (besides Bank of America, that is), I would move my account in a heartbeat!!
I heard mention of another WF scandal the other day regarding autos but did not get any detail.
Robbing people is the new way of wallstreet thieves since they were never criminally charged for robbery.
It really is that simple.
FRAUD is also a crime ! ! !
They mentioned the automobile scandal in the article.
it’s not new