Wells Fargo (NYSE:WFC) has agreed to settle a lawsuit brought forth by angered homeowners who felt as though they were being taken advantage of and ripped off when the bank took out pricey home insurance policies on their behalf.
Documents filed on Wednesday in a Miami federal court reveal that Wells Fargo and the two companies where it bought the insurance, Assurant Inc. and QBE, have agreed to repay select homeowners up to 11 percent of the premiums that they paid, MarketWatch reports. Total costs of the settlement and number of homeowners affected were undisclosed.
The situation unraveling can occur when a homeowner takes out a mortgage but neglects to buy an adequate property insurance policy to cover the assets that are still being paid off. The bank can then buy insurance for the homeowner, or “force place” the insurance policy.
A Wells Fargo spokesman told MarketWatch that the bank still believed that the insurance it bought “was issued in accordance with the terms of the mortgages and applicable laws,” but that the bank decided to settle “to avoid protracted litigation.”
“We continue to support our lender-placed insurance services,” the bank’s statement read, “which provide continuous insurance protection for real property customers when their voluntary insurance lapses.”
The same judge overseeing Wells Fargo’s case last week issued final approval for a $300 million settlement to be paid by J.P. Morgan Chase, also involving Assurant, for the same reasons. Last month, Bank of America and HSBC Holdings also found themselves on the business end of a forced-insurance suit, as they were ordered to pay out similar settlements. Citigroup has also been held to a $110 million settlement for the same reasons.
The plaintiffs in Bank of America’s case said that “force-placed insurance policies cost substantially more than comparable policies that could be purchased on the open market” in their complaint dated from 2012.