Wells Fargo recently agreed to pay $81.6 million in order to settle claims that it failed to send notices to homeowners in bankruptcy about changes in their mortgage payments. The bank reached this settlement after it admitted to violating a federal bankruptcy law.
According to the U.S. Department of Justice, Wells Fargo violated Bankruptcy Rule 3002.1. This rule requires mortgage creditors to provide homeowners in Chapter 13 bankruptcy with at least 21 days’ notice of any changes or adjustments to their monthly mortgage payments. The notice is intended to give homeowners the opportunity to contest the accuracy of any increases to their mortgage.
Wells Fargo admitted that it failed to file over 100,000 notices within the 21-day time period. It also admitted to failing to meet a deadline for conducting over 18,000 escrow analyses. The violations affected almost 68,000 accounts of homeowners who had declared bankruptcy.
If the bankruptcy court approves the settlement, funds will be distributed to certain homeowners who were part of bankruptcy proceedings from December 2011 through March 2015. Most of the homeowners will receive a credit to their mortgage account. The average credit will be about $1,254. Some of these homeowners will also receive a second credit if the initial payout was not enough to compensate them. Another portion of the settlement will be paid to homeowners who overpaid their mortgage.
In addition to Bankruptcy Rule 3002.1, which Wells Fargo violated in this case, there are other federal and state bankruptcy rules intended to protect people who filed for bankruptcy. For example, the Fair Debt Collections Practices Act prohibits debt collectors from using unfair, deceptive, and abusive practices to collect from debtors. Kentucky has it own set of laws that protect the rights of debtors. If you have declared bankruptcy or are considering doing so, you should speak with an experienced attorney to ensure that your rights are protected.
Source: Kentucky.com, “Wells Fargo to pay $81.6M to homeowners in bankruptcy,” Alex Veiga, Nov. 5, 2015