The U.S. Department of Justice has filed a civil lawsuit against National General Holdings Corp. and its subsidiaries—National General Insurance Company, National General Lender Services Inc., and Newport Management Corporation. The lawsuit, brought under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), accuses the companies of wrongfully imposing Collateral Protection Insurance (CPI) on vehicles financed through Wells Fargo, despite the vehicles already having valid insurance from other providers.
Principal Deputy Assistant Attorney General Brian M. Boynton, who leads the Justice Department’s Civil Division, stated, “Companies are expected to conduct their business practices with integrity and transparency. This lawsuit demonstrates our dedication to using all available resources to safeguard consumers from misleading and fraudulent actions.”
U.S. Attorney Eric G. Olshan for the Western District of Pennsylvania added, “The complaint reveals a long-term scheme to deceive car buyers. The defendants allegedly imposed unnecessary insurance on numerous Americans, resulting in severe consequences, including vehicle repossessions and improper collection practices. Our office, alongside our law enforcement partners, is committed to addressing insurance fraud and ensuring accountability under federal law.”
Filed in the U.S. District Court for the Western District of Pennsylvania, the lawsuit alleges that from at least 2008 to late 2016, National General systematically failed to verify whether vehicles financed by Wells Fargo were already covered by external insurance. As a result, the company allegedly imposed its own CPI on approximately 655,000 vehicles that were already insured. The complaint highlights several issues with National General’s tracking system, including sending insurance information requests to outdated addresses, failing to conduct necessary follow-up calls, and mismatching insurance data.
The complaint also alleges that National General was aware of its tracking system’s shortcomings and the high rate of erroneous CPI placements. Despite receiving numerous borrower complaints and recognizing high rates of false CPI placements internally and in reports to Wells Fargo, the company reportedly continued its practices.
Additionally, the lawsuit claims that borrowers were charged duplicate and unnecessary CPI premiums due to these practices. It further alleges that this conduct led to improper late fees, interest charges, negative impacts on credit scores, and wrongful vehicle repossessions.
FIRREA grants the Attorney General the authority to seek civil penalties for violations involving financial institutions. The complaint accuses National General of engaging in acts of mail fraud, wire fraud, and bank fraud.
The Civil Division’s Commercial Litigation Branch (Fraud Section) and the U.S. Attorney’s Office for the Western District of Pennsylvania are managing the case. The United States is represented by Trial Attorneys Lindsay DeFrancesco and Laura Hill from the Civil Division’s Fraud Section, as well as Assistant U.S. Attorney Adam Fischer.
It should be noted that the allegations in the lawsuit are not yet proven, and no determination of liability has been made.