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Wells Fargo now requires ‘affirmative request’ from customers before providing COVID forbearance

Consumers reported negative effects on credit as a result of unasked-for forbearance

[UPDATE: This story has been updated with information from Wells Fargo’s Tom Goyda that this change to their policy was put in place several months ago.]

Homeowners who were placed into proactive forbearance plans by Wells Fargo received positive news this week.

Law360 reports that in response to a class action lawsuit filed in Virginia, Wells Fargo has agreed not to place homeowners into a COVID-19 forbearance plan or extend an existing plan unless a customer requests forbearance. 

The lawsuit claimed the bank placed customers into these plans without notice, a direct violation of the Coronavirus Aid, Relief and Economic Security Act. 

A major complaint from the plaintiffs highlighted the negative impact the forbearance had on their individual credit scores. In some cases, the account holders asked to be removed and continued making their normal loan payments. 

Tom Goyda, senior vice president of consumer lending communications for Wells Fargo, told HousingWire that the company made changes to practices “several months ago” in regard to COVID-related forbearance.

“We now require an affirmative request from a customer before providing a COVID-related forbearance,” he said.

After reports surfaced in July that Wells Fargo was placing consumers into forbearance without their request, Senator Elizabeth Warren, D-Mass., a member of the Senate Banking Committee, pressed the bank for more details. She sent a letter on Oct. 1 to Federal Reserve Chair Jerome Powell that detailed the response from Wells.

According to that letter, “Wells Fargo admitted to entering certain customers into forbearance without their consent, identifying four categories of customers who were affected.

“The company was unable or unwilling to identify how many total consumers were affected, but did inform the Senators of a small subset, indicating that ‘(a)n internal review showed that at least 904 accounts held by customers in active bankruptcy proceedings were placed into forbearance without an affirmative request,’ and that the bank had received over 1,600 complaints about forbearance practices.”

The letter outlines the categories of affected customers:

  • “In early March, Wells Fargo began providing forbearances to customers in active bankruptcy proceedings if we identified a court filing indicating that the customer may have been suffering a COVID-19-related hardship.”
  • “From late March until early April, we automatically provided forbearances to customers who sent a secure email or contacted us by phone regarding a COVID-19-related hardship, as well as to customers who requested a fee waiver, even when the customers’ communications did not specifically request a forbearance.”
  • “In late March, Wells Fargo also granted forbearances to eligible Home Preservation customers (including some customers in active bankruptcy proceedings) who at the time: (i) were in the loan modification application process; or (ii) had been denied a forbearance before the pandemic.”; and
  • “Finally, in late March and early April, when a customer requested forbearance on one of the customer’s mortgage or home equity accounts, we extended the forbearance to that customer’s mortgage-linked accounts.” 

Wells Fargo representatives have argued the bank should be dismissed from the suit because customers “didn’t send the requisite notice of error before filing a lawsuit, and they don’t allege cognizable damages.”

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