13 December, 2016
Insurer Prudential Financial said Monday that it will stop distributing "MyTerm" insurance policies through Wells Fargo's branches and website, pending a review of how the bank sells the product.
The move comes after a lawsuit was filed claiming Prudential had tried to hush up evidence that Wells Fargo bankers - who were supposed to market the low-priced Prudential policy, MyTerm, to their customers - opened fraudulent accounts in customers' names and had premiums withdrawn from their bank accounts without their consent or knowledge.
Prudential also said it had asked for Wells Fargo's assistance in gathering all the necessary facts.
"We take any allegations of improper sales practices seriously, and if improper conduct is found, we take action and make things right with customers", Mr. Folk said.
Last year, Prudential's Individual Life Insurance business surveyed Wells Fargo customers about their experience with MyTerm, including reasons why some of them allowed the product to lapse.
The lawsuit notes that some applications listed obviously-fake addresses like "Wells Fargo Drive".
Prudential would appear to be the first partner company of Wells Fargo to get caught in the fallout from the bank's admission three months ago that thousands of its employees had opened unauthorized accounts in bank customers' names.
The Financial Industry Regulatory Authority Inc., the brokerage industry watchdog, said Friday it wants to speak with former bank employees who were terminated and ended up losing their securities registration.
Prudential is facing at least one purported class-action lawsuit in the matter in a complaint filed in federal court in New Jersey on Monday.
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Some state and local governments have also suspended business with Wells Fargo, including the Pennsylvania Treasury Department.
Wells Fargo isn't a defendant in the lawsuit. The coverage was available through kiosks in Wells Fargo branches, or could be purchased online using the bank's accounts.
Plaintiffs consistently flagged potential fraud unearthed during the investigation - including "a large number of similarities between how Wells Fargo Bank opened fraudulent bank accounts and how the MyTerm Policies were being sold through Wells Fargo Bank" - but their concerns were rebuffed numerous times by upper management, the complaint says.
The employees that came forward were part of the Prudential investigations team.
More alarming, the insurance premium payments may have come from dormant Wells Fargo accounts.
More than 700 e-mails sent to customers were returned as undeliverable, a dozen buyers said they didn't understand the policies or know about the premiums, and one complained about high-pressure sales tactics from a Wells Fargo representative, the Prudential employees alleged.
The firm conducted a survey of customers previous year about their experience with MyTerm, and the responses didn't indicate potential fraud, according to Mr. Hanson.
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.
The decision comes as a sales practice scandal rocks the San Francisco-based bank.