The flames are still burning from Wells Fargo’s fake account scandal last year, where the company opened as many as 2 million credit card and bank accounts without authorization, when now yet another scandal may be coming to light – this time in the mortgage department.
The last scandal was so huge that the company even said that it planned to change its employee compensation plan, de-emphasizing the sales goals that led to 5,000 of the bank’s former employees to open the fake accounts.
The last scandal cost the bank several senior-level executives and eventually, even its CEO John Stumpf was forced to step down in his attempt to, “restore trust in Wells Fargo.” It also lost the business of several states and cities which claimed the ethical outrage could not go unpunished.
Now, the bank is being accused of making unauthorized changes to home loans held by customers in bankruptcy, a new class action and other lawsuits against the company claim. The lawsuit shows these unauthorized changes were being made even while the company was in the middle of dealing with its fake accounts scandal, according to an article by Gretchen Morgenson for The New York Times.
The lawsuit claims these changes seemed to benefit the borrowers in the short-term as it lowered their monthly payments, the article states. However, the fine print showed it would extend the term of the loan for decades.
From the article:
Any change to a payment plan for a person in bankruptcy is subject to approval by the court and the other parties involved. But Wells Fargo put through big changes to the home loans without such approval, according to the lawsuits.
However, a spokesman for Wells Fargo denies the claims, saying the bank did notify the borrowers and the bankruptcy courts.
And while it is still unclear just how many unauthorized loan changes Wells Fargo put through, lawsuits have arisen in Louisiana, New Jersey, North Carolina, Pennsylvania and Texas.
From the article:
Bankruptcy judges in North Carolina and Pennsylvania have admonished the bank over the practice, according to the class-action lawsuit filed last week. One judge called the practice “beyond the pale of due process.”
The lawsuit contends that when a lawyer for a borrower has questioned the unauthorized changes, the bank reversed them.
(Photo credit: DW labs Incorporated / Shutterstock.com)