Wells Fargo in $81.6M settlement over notices to bankrupts
The Department of Justice’s U.S. Trustee Program has entered into a national settlement agreement [8.52 MB PDF] with Wells Fargo Bank N.A. (Wells Fargo) requiring the bank to pay $81.6 million in remediation for its repeated failure to provide homeowners with legally required notices, thereby denying homeowners the opportunity to challenge the accuracy of mortgage payment increases. These failures violated federal bankruptcy rules that took effect in December 2011 and imposed more detailed disclosure requirements to ensure proper accounting of fees and charges on homeowners in bankruptcy.
Bankruptcy Rule 3002.1 requires a notice 21 days before adjusting a Chapter 13 debtor's monthly mortgage payment. Wells Fargo failed to timely file more than 100,000 payment change notices and failed to timely perform over 18,000 escrow analyses between December 1, 2011, and March 31, 2015.
Under the settlement, Wells Fargo will pay
- $53.6 million to over 42,000 homeowners whose payments increased without the required Bankruptcy Rule notice. These payments will be credits to mortgage accounts.
- approximately $10 million in credits to homeowners' accounts at the end of their bankruptcy cases, if analysis shows the homeowners were not fully compensated in the initial crediting process.
- $1.5 million to homeowners who failed to receive notice of payment decreases and paid more than the amounts actually due.
- $1 million to about 2,400 homeowners who satisfied escrow shortages by making a lump sum payment, but whose monthly payments were not reduces to account for the lump sum payments.
- $4 million in cash refunds to homeowners who didn't receive timely escrow statements and whose escrow surpluses weren't refunded or credited toward the next year's escrow payments.
Wells Fargo has completed $3 million in remediation payments prior to the settlement.