The U.S. recently filed a civil complaint against National General Holdings Corp., an Allstate company, and its subsidiaries for allegedly erroneously force-placing collateral protection insurance (CPI) on vehicles financed through Wells Fargo, according to a Department of Justice press release. 

“Today’s complaint alleges a long-running scheme to defraud hundreds of thousands of car buyers,” said U.S. Attorney Eric G. Olshan for the Western District of Pennsylvania, in the release. “For years, these defendants saddled ordinary Americans, including residents of this district, with allegedly unnecessary insurance, leading to dire real-world consequences like repossessed vehicles and other unwarranted collection activities. This enforcement action reinforces an important message: our office, together with our law enforcement partners, will take decisive action to combat fraud in the insurance industry, protect consumers, and hold companies accountable for their wrongdoing under federal law.”  

Filed in the U.S. District Court for the Western District of Pennsylvania, the complaint alleges that the company required CPI on at least 655,000 vehicles that already had outside insurance. The release says that between 2008 and 2016, National General “systemically failed to track” if cars financed by Wells Fargo had insurance coverage from an outside carrier. 

“In particular, the United States alleges that National General’s tracking efforts were deficient for a variety of reasons, including that National General repeatedly mailed letters seeking insurance information to borrowers at addresses that had previously been returned as undeliverable,” the release says. “In many instances, National General made no phone calls to insurance carriers, agents, or borrowers to obtain outside insurance information despite internal requirements to make a certain number of phone calls, and National General often failed to match insurance information in its possession to financed vehicles.”

According to the release, National General was aware that its tracking system was ineffective. It says the company received thousands of complaints from borrowers. It also tracked and reported both internally and to Wells Fargo its high “false placement” rates, the release says. 

Because of the CPI, borrowers were charged duplicative premiums in connection to their loans, the release said. 

“The United States also contends that National General’s conduct had a range of additional negative consequences for borrowers, including improper charges for late fees and interest, negative effects on credit scores, and improper repossession of some financed vehicles,” the release says. 

The civil suit was brought under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), the release says. It authorizes the Attorney General to bring a civil action for penalties for violations of certain criminal predicate offenses that involve financial institutions or particular government agencies. 

The complaint accuses National General of violating FIRREA by committing acts of mail fraud, wire fraud, and bank fraud.

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