Wells Fargo & Co. is renaming its auto-loan business a year after it was beset by regulatory scandals and operational hurdles.
The unit, the king of U.S. auto lending until last year, will now be known as Wells Fargo Auto, according to a staff memo sent Thursday by Laura Schupbach that was obtained by Bloomberg News. It had been called Dealer Services, owing to its focus on lending to dealers for their operations and for indirect loans to car buyers.
"Our business deserves a new name that clearly reflects the work we're doing and the full scope of our customer base," Schupbach, who heads auto lending at the San Francisco-based bank, wrote in the memo. It shows "that we serve both dealers and consumers," she said.
Schupbach, who oversees about 5,000 workers, has been refashioning the business since she replaced Dealer Services head Dawn Martin Harp in April, closing regional business centers and consolidating teams. A few months after Schupbach's appointment, a former Wells Fargo executive revealed that the bank had been in discussions for roughly a year with regulators about problems with forcing insurance on auto-loan borrowers.
Federal and state regulators have since begun investigations into multiple issues with Wells Fargo's auto lending, the bank said in a November regulatory filing. Internal reviews found the company had billed some customers for insurance policies providing unwanted or unneeded collateral protection. The bank said it will pay $130 million to affected customers, $50 million more than it had previously offered.
Wells Fargo also discovered problems with placements for another type of insurance called guaranteed auto protection. Some of those customers have received refunds, according to the bank.
While the investigations have been swirling at Wells Fargo, changes in the auto-lending market have caused headaches for lenders. Vehicle resale prices have dropped, making it harder to blunt losses by repossessing cars when borrowers default. Wells Fargo decided to pull back from the market in mid-2017 and tighten underwriting standards, causing it by June to lose its crown as the largest auto lender to Ally Financial Inc.
Schupbach last year was given control of operations that make loans directly to automobile buyers, according to another memo Bloomberg News obtained. The unit had been housed under John Rasmussen's personal-lending division.
Since last summer, she's overseen a plan to close almost all of the auto segment's 57 regional business centers. Three larger sites will replace them in Raleigh, N.C.; Chandler, Ariz.; and Irving, Texas. She also consolidated teams that fund loans into two hubs now located in Chandler and Irving.