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Wells Fargo faces California, New Jersey probes over sales
[NEWARK, New Jersey] Wells Fargo & Co is under investigation by regulators in California and New Jersey to determine whether the bank signed up customers for Prudential Financial Inc life policies without their permission.
The announcements Monday by regulators followed fraud and misconduct allegations raised last week in a whistle-blower lawsuit claiming the insurer covered up an internal inquiry that found San Francisco-based Wells Fargo may have fraudulently opened Prudential's low-cost MyTerm policies.
California Insurance Commissioner Dave Jones said that his department will work with New Jersey watchdogs to examine "all aspects" of the allegations, and that Prudential's practices will be investigated as well.
"We'll be looking at whether there were any licensing violations associated with" Wells Fargo's sales, Mr Jones said Monday in a phone interview. "We'll also be looking at whether they violated the law by allegedly signing people up for insurance without their permission." The insurer said earlier Monday that it's halting distribution of MyTerm life policies through Wells Fargo. The coverage was available through kiosks in Wells Fargo branches, or could be purchased online using the bank's accounts. Newark, New Jersey-based Prudential said it will reimburse customers who were charged for coverage they didn't want.
Wells Fargo agreed in September to pay US$185 million in fines to settle a federal probe that it may have opened millions of bank accounts for customers who didn't want them.
The case is a setback for Prudential, which incurred billions of dollars in costs, changed compensation practices and brought on new leadership in the 1990s after scandals including a lawsuit alleging that agents misled consumers by convincing them to buy new life insurance unnecessarily to boost commissions. Prudential also was sued Monday by an Arizona customer in a case seeking to proceed as a group, or class-action, lawsuit.
"Our first objective is to figure out the truth," Mr Jones said. "The penalties can be quite severe if there is a violation. The purpose of the penalties is to discourage unlawful conduct and to hold accountable those that engage in unlawful conduct."'
Both companies declined Monday in New York trading, before Mr Jones's announcement. Wells Fargo dropped US$1.36 to US$55.78, narrowing its gain since Dec 31 to 2.6 per cent, the worst performance this year in the 24-company KBW Bank Index. Prudential fell US$1.50 to US$104.52, trimming its 2016 advance to 28 per cent.
New Jersey's regulator said earlier in the day that it was investigating the insurance sales, in a statement that didn't provide specifics. Wells Fargo didn't immediately return a message for comment.
"We are in active discussions with the New Jersey Department of Insurance about our review of the distribution of the MyTerm product through Wells Fargo, and we are responding to their requests for additional information," Scot Hoffman, a spokesman for Prudential, said in an e-mailed statement.