Law360 (November 3, 2020, 4:43 PM EST) -- Wells Fargo will no longer place mortgages into a COVID-19-related forbearance plan without permission from homeowners as part of an ongoing proposed class action lawsuit alleging the bank pushed customers into such plans without notice, according to an order in Virginia federal court.
In the agreement signed Oct. 30 and filed Monday, Wells Fargo & Co. and Wells Fargo Bank NA agreed not to create a COVID-19 forbearance plan or extend an existing plan unless a customer requests one.
The agreement between the two sides, which was signed by Chief U.S. District Judge Michael F. Urbanski, resolves a September injunction bid by the proposed class of homeowners alleging Wells Fargo unilaterally placed their mortgages into forbearance in violation of the Coronavirus Aid, Relief and Economic Security Act, among other laws.
In the short order, the parties also agreed that the agreement doesn't concede any disputed issue between them.
"There is much work remaining to be done to make things right for borrowers already impacted by Wells Fargo's unauthorized forbearance scheme," Theodore O. Bartholow III of Kellett & Bartholow PLLC, counsel for the consumers, said in a statement to Law360 on Tuesday.
"Nevertheless, we are pleased that Wells Fargo has at least agreed not to make things worse by subjecting any more of its customers to unwanted forbearances," he said.
The lawsuit was originally filed in July by plaintiffs including Gerald Forsburg, Jenna Doctor, Luis and Marisol Castro, and Barbara Prado, who allege they were harmed by the forbearance plans, which temporarily suspended their monthly mortgage payment obligations without their consent.
Their credit scores and credit reports were negatively impacted by the plans, and they were unable to benefit from historically low interest rates and getting full relief under the CARES Act, the lawsuit alleges.
The Wells Fargo account holders say that not only did none of them request a forbearance, but some asked for it to be removed and even made payments to keep the loan current, despite their new status.
In an October bid to toss the case, the San Francisco-based bank said that as a loan servicer, it doesn't have a contract with any of the named customers, which should end their breach of contract claims.
Among other reasons, Wells Fargo also argued it should be dismissed from the suit because the consumers didn't send the requisite notice of error before filing a lawsuit and they don't allege cognizable damages.
The mortgage holders' claims under the California Rosenthal Act — the state's analog to the federal Fair Debt Collection Practices Act — should also be dismissed because the alleged unapproved forbearances aren't one of the law's prohibited practices, Wells Fargo argued.
"The [second amended complaint's] attempt to cherry-pick a few enumerated predicate subsections to fit this fact pattern is unconvincing," the bank said in its October bid to dismiss the case.
Wells Fargo is facing several suits stemming from its actions during the pandemic, including one from agents who helped businesses prepare applications for forgivable loans under the federal Paycheck Protection Program. The agents claim they are due fees for their services, a claim the bank said is unfounded.
The bank is also facing several suits from small businesses that claim Wells Fargo favored larger businesses when doling out the loans, instead of awarding them on a first-come, first-served basis.
Counsel for Wells Fargo did not immediately respond to a request for comment on Tuesday.
The customers in the Virginia case are represented by Malissa Lambert Giles of Giles & Lambert PC, Karen L. Kellett, Theodore O. Bartholow III and O. Max Gardner of Kellett & Bartholow PLLC and Abelardo Limon Jr. of Limon Law Office.
Wells Fargo is represented by Michael E. Hastings, J. Benjamin Rottenborn and Justin Simmons of Woods Rogers PLC and William Mayberry, Andrew Atkins, Amy Williams and John Lynch of Troutman Pepper.
The case is Gerald Forsburg v. Wells Fargo & Co. et al., case number 5:20-cv-00046, in the U.S. District Court for the Western District of Virginia.
--Additional reporting by Rachel O'Brien. Editing by Janice Carter Brown.
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