Wells Fargo Ordered to Face Claims Over Loan Fees

Wells Fargo Ordered to Face Claims Over Loan Fees

Wells Fargo is at it again, this time facing allegations that it improperly charged homeowners with erroneous fees. The bank sought to dismiss the case but a federal judge in Camden, New Jersey said the homeowners could proceed with their bad faith claims. Since the case was brought as a class action, the bank could be facing hundreds of millions in penalties and could have to refund homeowners.


The case was brought by Dolores Zirbser and Bruce Jon Spalla. The couple took out a home equity loan in 2006 secured by their home in New Jersey. The loan was originally with Wachovia but later sold to Wells Fargo in 2008.


The couple say that soon after Wells Fargo took over, the bank began to get greedy and charge unauthorized fees. Specifically, they claim that the bank charged them debit charges in lieu of what should be credits in October of 2011. In August 2014, they were charged both an “advance fee” and an access fee. In October 2016, they were again charged debit charges instead of what should have been credits.


They say none of these fees were authorized by the loan documents. [Another reason why you must always pay attention to your statements!]


The couple sued in 2018 and sought a jury trial. They also filed as a class action meaning if later approved by the court, everyone with similar charges could be included in the lawsuit.


Predictably, Wells Fargo attempted immediately attempted to have the lawsuit dismissed.


Wells Fargo’s first line of attack was that the couple waited too long to sue. In New Jersey, people have six years to file a lawsuit for a contract claim. The court said that with the first illegal charge, the six year time clock began to run. Since they filed their lawsuit in December 2018, any charges before December 2012 are time barred.


Zirbser and Spalla might not get all of their fees back but Wells Fargo can’t totally escape their own liability either!


Contracts in New Jersey (and most other states) include an implied covenant requiring the parties to act in good faith. Depending on this state, this is often called a covenant of “good faith” or “fair dealing”.


To show a breach of the covenant of good faith, a homeowner must show “(1) the bank act[ed] in bad faith or with a malicious motive, (2) to deny the [homeowner] some benefit of the bargain originally intended by the parties, even if that benefit was not an express provision of the contract.”


The court found that although the complaint was somewhat sparse in its facts, a jury could determine that charging them fees not contained in the loan terms constitutes “bad faith, dishonesty or improper motive.”


The court’s ruling is a preliminary one. Wells Fargo has not been found to have acted improperly. The judge’s ruling means there are enough facts in the complaint for the case to go forward. The couple must still prove they were improperly charged fees.


We think a jury will agree with the couple.


Unfortunately, fraud claims brought by the couple were tossed. That ruling is a reminder why it is never good to wait. If the fraud charges had remained, it would be easier for the couple (and other homeowners) to collect punitive damages.


Class Actions for Improperly Charged Fees and Charges


The action against Wells Fargo was brought as a class action case. Generally, it is almost impossible to find a lawyer willing to take a single homeowner case for improper fees. Assuming the fees in this case were $1000, it could easily take a hundred hours of legal work to try and collect $1000.


Banks know that homeowners simply can’t afford that. If the average lawyer charges $300 per hour, that would be $30,000 spent to collect $1000.  Nor can lawyers take the case on a one-third contingency fee. That could be 100 hours of work for $333 dollars! No one will work for $3 an hour.


Class cases in the mortgage world are quite restricted. In 2013, Congress greatly curtailed what kind of cases against banks could be brought by borrowers as a class action. Wrongful foreclosures and failure to process loan modifications are examples of cases that cannot easily be brought as a class case.


Banks know that most homeowners will never sue for a few hundred bucks or even a few thousand. But with a class action, the homeowners or borrowers can join forces. And that makes it worthwhile for the lawyers.


This case against Wells Fargo is a long way from being over. By simply surviving the motions to dismiss, however, the homeowners have gained a big advantage.


The other major challenge to class actions and lawsuits against banks are waivers that are now common in loan documents. Since the meltdown, banks have become much more sophisticated and often include language that indicates by accepting the mortgage funds, the borrower gives up his or her rights to sue the lender or participate in a class action.


The Seventh Amendment to the U.S. Constitution says in part, “In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved…” Unfortunately, the current Supreme Court says that citizens can waive their Constitutional right to a jury trial. And today, we often find these waivers buried in the fine print of mortgage documents.


That puts Zirbser and Spalla in a weird catch-22. Their mortgage began with Wachovia in 2006. Lawsuits waivers were not as common then. But because of a 6 year statute of limitations, they can only go back and seek fees illegally imposed after December 2012.


Mahany Law and Class Actions – We Sue Banks!


We got our start by suing banks and have never forgotten those roots. Although we no longer handle residential foreclosures or real estate matters – we haven’t since we went national – we do bring class actions against banks and lenders.


Our lender liability practice today consists primarily in the representation of commercial property holders (loans of $5 million or more). We also bring claims on behalf of the United States against banks. That includes the $16.7 billion against Bank of America and $300 million against Allied Home Mortgage we helped secure. And yes, we still consider residential cases but only as class actions. (We are currently litigating a multi-million dollar case against Freedom Mortgage.)


Can we help you? We get approximately one dozen emails per day from folks seeking to protect their home and family. We get it but we simply can’t take individual homeowner cases and Congress and the banks’ own lawsuit waiver provisions in contracts won’t permit lawyers to bring them as a class case.


IF your case merely involves fees or charges and nothing else and IF your loan documents don’t contain a class action waiver, we may be able to help. But we don’t take phone calls on class action investigations. Emails only.


For more information, contact us online or by email at [hidden email].


MahanyLaw – We LOVE Suing Banks

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