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- The economic uncertainty of the coronavirus pandemic has forced Wells Fargo’s bank to stop processing auto loans with as many as 1100 independent dealerships and refocus on dealers it already has deep relationships with.
- The change is likely to affect used-car shoppers more, but they can still get loans from other banks to buy their vehicles.
- If the dealer already looks to multiple lenders for its customers, this change might not be noticeable to someone buying a car.
Shoppers might need to budget for some extra logistical legwork if they buy a car from an independent dealer and had planned on getting a loan from Wells Fargo. The financial institution, which has faced more than its share of consumer-fraud charges since the turn of the century, will stop its indirect auto lending at up to 1100 independent auto dealerships in the United States. That is around 10 percent of the total number of lenders Wells Fargo deals with. The change, first reported by CNBC, is likely to affect used-car shoppers more than people buying new cars.
Wells Fargo says it is doing everything it can to help customers during COVID-19, for instance offering loan deferrals to customers who have been impacted by the pandemic, but it will not continue working with independent dealers that it does not have a “deep, long-standing relationship” with, the company said in a statement sent to Car and Driver.
“As a responsible lender, we also have an obligation to review our business practices in light of the economic uncertainty presented by COVID-19 and have let the majority of our independent dealer customers know that we will suspend accepting applications from them,” the company said.
Wells Fargo does business with around 11,000 dealerships in the U.S., and told C/D that its new policy impacts less than 10 percent of those relationships. Wells Fargo doesn’t deal directly with the dealerships in these relationships, but loans money to the car shoppers themselves. With the policy change, car shoppers at the independent dealers that Wells Fargo is cutting ties with will no longer be able to get a loan from the company. Of course, those customers are still able to get financing from other lenders, but the change may add one step to the process if shoppers have to look for loans at banks that do not have agreements in place with the dealership. Or the change might not be noticeable to the shopper at all, if the dealership uses multiple lenders and simply sends new loan applications to another lender it has a relationship with.
Wells Fargo’s History with Auto Loans
Wells Fargo has had an up-and-down auto-loan business in recent years. In 2018, the company put new energy into its auto-loan business after paying a $ 1 billion fine for violating the Consumer Financial Protection Act by forcing its auto-loan customers to buy insurance they did not need, according to the Consumer Financial Protection Bureau. Wells Fargo’s auto loan originations were $ 6.5 billion in the first quarter, an increase of 19 percent from first quarter of 2019, the company said in April, adding that this reflects “our renewed emphasis on growing auto loans following the restructuring of the business.”
The financial institution also committed massive customer fraud between 2002 and 2016 when it created millions of accounts in customer names without telling them. In February, as the New York Times reported, Wells Fargo agreed to pay $ 3 billion to settle those charges.
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