As many as 1.4 million used car buyers, who financed vehicles through Wells Fargo Bank, were forced to pay for insurance they didn’t need, according to a civil lawsuit alleging bank and wire fraud that was filed Wednesday in the U.S. District Court for the Western District of Pennsylvania.

The six-count lawsuit was filed against National General Holdings Corp. and three affiliate companies over an alleged scheme that forced consumers to buy auto insurance that “National General knew, or recklessly disregarded the fact that borrowers already had insurance through other insurers,” the complaint said. The forced sales began in April 2005 and lasted until Wells Fargo and National General ended their contractual relationship in September 2016.

Allstate Holdings LLC, which acquired National General in 2021, did not answer an emailed request for comment Thursday and Wells Fargo spokesman Joseph Rupolo was not immediately available.

The forced insurance caused borrowers to “pay money they did not owe, borrowers to default on their loans, vehicle repossessions and negative impacts to borrowers’ credit scores,” according to the lawsuit. The U.S. Attorney in Pittsburgh requested a jury trial and is seeking civil penalties up to $2.4 million per violation, plus legal fees.

Well Fargo, on average, forwarded nearly 2.4 million auto loans annually to National General to track buyers’ insurance coverage.

The unnecessary insurance annually cost each consumer nearly $1,100 or about $6,600 for a six-year auto loan, which 640,000 to 1.4 million borrowers paid, the lawsuit said. The cars that were financed were used and mostly older, with an average price of $15,000.

Borrowers with good credit or who had high dollar loans were exempt from loan tracking. This included consumers who bought a Tesla, which has a starting price of around $39,000.

These loans were considered least risky to the bank.

Moreover, National General’s premiums were generally higher and the policies provided less protection than comprehensive and collision plans that were available on the open market. The cost of the unnecessary coverage was tacked onto borrowers’ monthly loan payments, with interest.

During the 10-year period the scheme was conducted, National General realized over $500 million in premiums and at least $22.1 million in fees for tracking borrowers, the U.S. Attorney said.

An account manager at National General called the duplicative car coverage “a function of the program,” according to the lawsuit.

Here’s how it worked:

Wells Fargo hired National General to make sure consumers had auto insurance on vehicles that were financed through the bank, a process known as loan tracking. If National General couldn’t confirm the borrower had coverage, the company automatically issued its own policy, then billed the bank for the insurance.

Wells Fargo passed along the insurance cost to the borrower, according to the lawsuit. A consumer’s monthly car payment rose an average of 25% after National General’s premium was tacked onto loans.

But National General’s practices for making sure Wells Fargo-financed vehicles were insured was faulty, resulting in duplicative policies being issued to car buyers at a rate ranging between 56% and 93%, the lawsuit said.

Stopping the coverage was not easy.

Telephone calls to borrowers were among the ways National General call center operators verified that an owner’s auto insurance policy was current, but the information requested was not often readily available. On phone calls with borrowers, for example, the company asked for the year, make and model of the vehicle; the last five digits of the vehicle identification number; policy number; effective day of the policy; coverage expiration date; and the comprehensive and collision deductible.

Any one piece of information that was missing meant the consumer would be billed for National General’s coverage, according to the lawsuit.

“In other words, National General’s priority was maintaining its lucrative contract with Wells Fargo,” according to the lawsuit. “National General did nothing for over a decade to improve its processes.”