In 2018, our client entered into a variable rate mortgage agreement with the Wells Fargo Bank, N.A. in order to purchase a residential home. A key selling point was the loan’s supposedly lower, introductory or “buy down” rate for the first year, which was supposed to be followed by a slightly higher rate for the life of the loan.
However, after careful analysis, our client determined that he was not really receiving the promised lower introductory rate. Specifically, while the amount of the monthly payments were based on the agreed lower interest rate during the introductory period, Wells amortized loans at the higher, non-introductory rate of interest even during the loan’s first year, when the introductory rate was supposed to be in effect. This resulted in higher-than-expected balances at the end of the initial period. He attempted to address the issue with Wells, to no avail.
Our client filed a class action complaint against Wells Fargo Bank, N.A. in federal court in the Eastern District of New York, alleging that Wells was, in essence, engaged in a bait and switch scheme that lured borrowers into contracts with the promise of lower “bought down” interest rates that it never truly honored. Specifically, the lawsuit alleged that Wells had breached its contracts with homeowners and that the bank’s conduct was unlawful under New York’s prohibition against deceptive practices in consumer transactions. We also alleged that Wells Fargo violated the federal Truth in Lending Act, which requires lenders and creditors to disclose key terms, conditions, and costs of borrowing money when entering into consumer loan.
Recently, Wells Fargo Bank, N.A. moved to have the case dismissed, claiming that the contract was clear that consumers would get a lower payment during the introductory period but not a lower interest rate. Wells also claimed that, for a variety of reasons, the case could not proceed as a class action.
The Court rejected all of Wells Fargo’s argument and held that the plaintiff had adequately alleged a breach of contract in violation of New York’s consumer deception statute (General Business Law Section 349) and of the Truth in Lending Act. The Court agreed with us that the language in the contract that Wells relied on as a justification was in fact ambiguous and that the case could move forward as a class action. The Court’s rejection of Well’s position was first expressed in a detailed Report and Recommendation issued on May 10, 2019 by Magistrate Judge Steven Locke. More recently, Wells’ objections to the Magistrate Judge’s Report and Recommendation were overruled by an Order and Decision issued by Judge Sandra J. Feuerstein on August 20, 2019.
How an Experienced Consumer Suit Attorney Can Help
While many contracts are straightforward and clear, certain entities include misleading information in their contracts and agreements, and in doing so abuse consumers’ rights. Predatory or deceptive lending practices can add undue stress and frustration to your life.
The attorneys at Schlanger Law Group understand consumer rights and the difficulties of dealing with large corporations. We help our clients fight against unlawful business practices such as hidden fees, inaccurate credit reporting, and more.
If you have experienced unfair contractual agreements or deceptive mortgage lending practices, it may be in your best interest to reach out to our experienced legal team. With years of experience in state and federal consumer protection, we could help you understand and assess your situation and choose the best legal path to hold a company, business, or other entity accountable for their actions.