SEATTLE--(EON: Enhanced Online News)--Wells Fargo (NYSE:WFC) used “force-place” insurance clauses in form mortgage agreements to charge homeowners insurance premiums up to 10 times higher than normal rates and to make homeowners pay for backdated policies, according to attorneys who have filed lawsuits challenging the practice.
“Through exclusive dealing arrangements with insurers, we believe the insurers actually decide which homeowners must get new or extra insurance. The insurers then charge exorbitant rates for their policies in order to kick-back profits to Wells Fargo as so-called ‘commissions’ and cover their costs of managing the bank’s loan portfolio.”
The law firm, Hagens Berman, represents homeowners who allege that Wells Fargo illegally exploited the force-place insurance clauses in form mortgage agreements to increase revenue for the bank. Force-place insurance clauses allow the lender to arrange for insurance for any borrower who fails to maintain insurance the lender demands.
Wells Fargo, attorneys claim, uses these clauses to arrange for insurance that is much more expensive than typical market rates and provides less coverage, because it has exclusive contracts with insurers that provide Wells Fargo with kickbacks in the form of “commissions” and free services.
The firm is continuing to investigate this practice as litigation proceeds, and invites homeowners who have been forced to pay for insurance by Wells Fargo to email WFInsurance@hbsslaw.com or call (206) 623-7292, to discuss potential legal options.
More information is available at www.hbsslaw.com/cases-and-investigations/cases/wfinsurance.
Hagens Berman represents homeowners in cases filed in New Jersey and California, but is continuing to investigate the practice nationwide.
“We allege that these provisions are intended to protect the lender’s interest in the underlying property when a borrower’s policy does not, but Wells Fargo has twisted and exploited them to make millions upon millions of extra profit each year,” said Steve Berman, managing partner of Hagens Berman and the lead attorney on the cases. “Through exclusive dealing arrangements with insurers, we believe the insurers actually decide which homeowners must get new or extra insurance. The insurers then charge exorbitant rates for their policies in order to kick-back profits to Wells Fargo as so-called ‘commissions’ and cover their costs of managing the bank’s loan portfolio.”
In addition, Berman explained, “Our lawsuits claim that Wells Fargo forces homeowners to buy backdated policies which cover past periods of time in which no losses occurred and it forces the purchase of excess insurance, over and above the value of the loan on the property, solely to increase its kicked-back ‘commissions.’ We think these practices are deceptive, unfair and illegal, and we will fight for a fair resolution for homeowners.”
Force-place policies have also come under scrutiny by government officials and regulatory groups, including the New York Department of Financial Services, the National Association of Insurance Commissioners, and the Federal Housing Finance Agency.
Seattle-based Hagens Berman Sobol Shapiro LLP represents consumers, workers, whistleblowers and investors in complex litigation. The firm has offices in nine cities and has been named one of the top plaintiffs’ law firms in the country by the National Law Journal six times. Founded in 1993, HBSS continues to successfully fight for consumer rights in class-action litigation. More about the law firm and its successes can be found at www.hbsslaw.com. Visit the firm’s class-action law blog at www.classactionlawtoday.com.