Government Sues National General for Forcing Customers to Get Unnecessary Insurance
- The government has filed a lawsuit against National General for allegedly coercing customers into obtaining collateral protection insurance.
- Despite already having insurance from other providers, at least 655,000 vehicles were required to get insurance from National General.
- Customers repeatedly provided proof of insurance, but National General failed to cancel their unnecessary policies.
The United States Department of Justice has filed a lawsuit against National General Holdings Corp, owned by Allstate, for forcing Collateral Protection Insurance (CPI) on vehicles financed through Wells Fargo. This action was taken despite borrowers already having insurance coverage through other providers.
According to the government, this issue persisted for nearly a decade as National General “systemically failed to accurately track whether cars financed by Wells Fargo had the requisite insurance coverage from an outside carrier.” As a result, the company knowingly or recklessly imposed its own, more expensive CPI on at least 655,000 vehicles that already had outside insurance.
Given the magnitude of this issue, it is evident that National General exhibited gross incompetence. The government cited various problems, including repeatedly sending letters to incorrect addresses and, in many instances, failing to make simple phone calls. The government emphasized the lack of communication, stating that National General often neglected to contact insurance carriers, agents, or borrowers to obtain outside insurance information, despite internal requirements to do so.
Wells Fargo
In addition to being forced to pay for unnecessary collateral protection insurance, victims had to endure several other issues. These included improper charges for late fees and interest, negative impacts on credit scores, and improper repossession of some financed vehicles.
One case highlighted by the government involved a victim who financed a Ford Ranger through Wells Fargo. The victim had insurance on the truck at the time of purchase, yet was still charged $652 for unnecessary collateral protection insurance.
Despite submitting proof of insurance multiple times, National General failed to cancel its policy. Only after the victim lodged a complaint with the Office of the Comptroller of the Currency did National General finally cancel the policy, two days later.
Allstate
It remains to be seen how this situation will unfold, but there could potentially be significant financial implications. National General reportedly knew its tracking system was ineffective and erroneously imposed CPI on hundreds of thousands of borrowers. The company received numerous complaints from borrowers and acknowledged the issue internally as well as with Wells Fargo.
