No doubt, Wells Fargo is among the most respected names in the country, but then you go on to hear about the Wells Fargo Class Action Lawsuit, and it has a lot to do with the CARES Act and whatever happened with all those COVID-related mortgage forbearances. So, just in case, so far you don’t know anything about it, or you’re here to just know about the settlement that recently happened, then just keep on reading about this case because there is a lot to talk about here.
What Is This Case About?
Essentially, it was about how Wells Fargo communicated mortgage account details to credit reporting agencies after some borrowers went into COVID-related mortgage forbearance. Officially, the case was called Stoff v. Wells Fargo Bank N.A., and it was initiated in a California state court in San Diego in 2020.
The crux of the matter was that some borrowers argued their mortgage accounts should have been continuously reported as current. But they said that, instead, the accounts were reported as “in forbearance” or in some other way. Indeed, the complaint said that this kind of reporting may have lowered their credit scores. So, the matter of dispute was not only about the missed payments, but also about how the mortgage’s status was being represented on the credit reports.
Why Did This Happen During COVID?
Actually, this issue primarily goes back to the beginning of 2020 when the COVID-19 virus outbreak caused financial troubles for a lot of people. The CARES Act was passed in March 2020 as a way to provide help during extremely difficult times such as this one. One major aspect of that law was that it allowed borrowers who fulfilled certain conditions to apply for mortgage forbearance.
Forbearance quite simply means the lender agrees that the borrower can stop or make lower mortgage payments for a certain period of time if the borrower is having financial difficulties. The idea behind this help was to give people the chance to get through a difficult time without having their credit seriously damaged. Controversy arose at this point because some borrowers believed that their accounts were not being reported to the credit bureaus on a level with the protections granted to them.
What Did Borrowers Say Wells Fargo Did Wrong?
The borrowers who brought up the lawsuit against Wells Fargo claimed that the bank wrongly reported some of the customers’ protected accounts as “in forbearance” when in fact they should have been reported as “current”. It may sound like a minor difference, however when it comes to credit reports, even a very small change in wording can have a big impact.
Their reasoning was that if a mortgage loan was in good standing before the borrower requested CARES Act forbearance, in many situations it should have been reported as such continuously. Since they claim that this did not happen in some instances, the borrowers stated that the misreporting may have resulted in a negative credit reporting and could have lowered their credit scores.
How Much Was The Settlement Amount?
Wells Fargo consented to shell out $56.85 million to resolve the case. However, there is one very crucial point that you shouldn’t overlook in this respect, settling the case does not imply that Wells Fargo acknowledged doing any wrongdoing. The bank not only rejected the wrongdoing, but, nonetheless, it agreed to call off the case by parting with the settlement amount.
In fact, this is rather a standard practice in these types of cases. At times, companies figure that settling a case is preferable to carrying on with the court battle for a significantly longer time.
