Overcharging Veterans on Home Refinancing Garners $108M Penalty
Wells Fargo has repeatedly found itself answering to government regulators for violating consumer rights – most recently for overcharging military veterans on home finance loans.
Just one week before announcing the $108 million settlement it had reached with the federal government for this wrongdoing, the bank revealed it was paying out $80 million in compensation for wrongfully force-placing car insurance on some 570,000 consumers. A significant number of those customers their vehicles wrongly repossessed when they couldn’t keep pace with the artificially high payments – which impacted their credit scores too. And just before that, the bank was answering to allegations that more than 5,000 former employees opened 2 million unauthorized accounts in order to rake in sales and bonuses. The bank paid an $185 fine, plus another $142 million settlement following a class action in that case.
In the case of military veterans, it all stems from a 2006 lawsuit claiming the Interest Reduction Refinance Loans through the Department of Veteran Affairs – issued by Wells Fargo – should not have been eligible for guarantees through the VA because the bank was reportedly charging loan fees that weren’t authorized. The VA then paid claims after a number of those loans defaulted, and the government then sought redress from Wells Fargo.
Now under the agreement in the whistleblower case, the bank will pay more than $100 million to resolve that claim.
It’s not clear from statements released to which branch of government the money will be released, but Wells Fargo maintains a denial of the allegations. A separate class action lawsuit on this very same issue was settled by the bank in 2011, which included a $10 million refund to veterans who received loans through the bank from the VA IRRRL (Interest Rate Reduction Refinance Loans) between 2004 and 2010. It’s believed approximately 60,000 of these loans were generated during this time frame, which means each household received about $175.
The government claim was pursued by two mortgage brokers under the federal False Claims Act, which allows individuals to bring claims on behalf of the government (also known as a qui tam lawsuit). However, the government had declined to assist the mortgage brokers, which is unfortunate because government intervention often increases the final settlement amount. However, it does mean the two mortgage brokers will get a more substantial cut of the settlement.
As noted by an attorney in the class action case, the bank profited handsomely by passing off certain charges to veterans that were supposed to be paid by the bank. Eight other lenders had been sued for the same reason, and similar losses had been recouped. Others included Bank of America, SunTrust Banks Inc., JPMorgan Chase & Co and Citigroup Inc. However, Wells Fargo is the largest provider of loans guaranteed by the VA, funding about a quarter of them for the last 16 years.
Our Miami foreclosure attorneys understand another issue on the horizon for Wells Fargo is whether it inflicted financial harm on consumers via residential mortgage fees, add-on products and frozen deposit accounts.
The VA loan program is supposed to be one of the best on the market, giving veterans the option to make no down payment, avoid paying private mortgage insurance (even if they can’t put down 20 percent) and offer competitive interest rates of 0.5 to 1 percent lower than conventional interest rates.
If you’re battling debt collection in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday at 5 p.m. on “Debt Warriors with Bruce Jacobs and Court Keeley,” discussing foreclosure topics that matter to YOU.