Wells Fargo Receives a 3.17 Million Dollar Lesson in Playing Fair.
On April 5, 2012, the Honorable Judge Elizabeth W. Magner of the U.S. Bankruptcy Court, East District of Louisiana ordered Wells Fargo to pay $3.17 Million in Punitive Damages along with Compensatory Damages of over $24,000 and litigation costs of over $290,000 in the U.S bankruptcy court case of Michael L. Jones v. Wells Fargo.
What did Wells Fargo do wrong?
Wells Fargo misapplied the mortgage payments from Debtor Mr. Jones, resulting in additional late fees and costs being assessed to his account and a $24,000 overcharge to his loan. Wells Fargo would apply any payments first to the fees and costs then to the outstanding principal, accrued interest, and escrowed costs, causing additional late fees and default fees being assessed to his loan. The Bank also would apply the mortgage payments to the oldest charges outstanding on the mortgage rather than the most current payments, which went against the Confirmed Chapter 13 Plan.
In a nutshell, this practice was contrary to the terms in Mr. Jones’ note and mortgage and any other Wells Fargo’s standard notes and mortgages, as well as against the terms of the Confirmed Chapter 13 Plan and violated the “Automatic Stay.” Also Wells Fargo did this without disclosing this practice to the Court.
But what particularly angered Judge Magner was Wells Fargo’s ambush against the Debtor in court, figuring it could just outspend the Debtor in Court rather than correct its errors.
This litigation took over 5 years and cost hundreds of thousands of dollars in attorney’s fees due to Wells Fargo aggressive litigation tactics. In addition, Wells Fargo’s actions caused over 7 days in court appearances in the original hearings and trials, 18 post-trial pleadings, 8 appeals or notices of appeal, and over 22 issues raised on remand, requiring responses by the debtors and over three hundred pages in briefs.
Additionally, Wells Fargo Bank took over 4-6 months and over 4 court hearings merely to acquire a simple accounting history on Mr. Jones’ loan.
Judge Magner noted that Wells Fargo “prefers to rely on the ignorance of borrowers or their inability to fund a challenge to their demands.” Further the Judge Magner, commented that “when exposed, (Wells Fargo) it revealed its true corporate character by denying any obligation to correct its past transgressions and mounting a legal assault to ensure it never had to.”
To be clear, that's a $3.17 million fine on a single loan. Lesson learned or a drop in the bucket for Wells Fargo?
