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US lawmakers seek answers on Wells Fargo’s forbearance practices

July 31, 2020. Print article

Scandal-ridden may find itself in hot water again after a pair of U.S. senators fired off a letter to the bank’s CEO on Thursday requesting information on reports that the bank placed borrowers in mortgage forbearance programs without their consent. 

Sen. Elizabeth Warren, D-Mass., and Banking Committee member Brian Schatz, D-Hawaii, expressed concerns in the letter that the third-largest U.S. bank by assets was putting consumers “at risk of greater financial hardship in the midst of one of the worst economic collapse in history.” The letter noted that the reports of misconduct may further point to the broken culture that led to the bank’s fake-accounts scandal in 2016. 

The letter followed NBC News investigations in July that found the bank paused borrowers’ mortgage payments without their consent under the Coronavirus Aid, Relief, and Economic Security Act, a law meant to help homeowners experiencing financial hardship due to the pandemic. The forbearance options allow borrowers to delay payments on their mortgages by up to a year. 

Another NBC News report said that borrowers who were not delinquent on their loans in at least 14 states had their mortgages put into forbearance without their knowledge or consent. This led to some of the consumers either not receiving credit for months of payments, having their credit reports damaged, or losing the opportunity to change or refinance their mortgages when interest rates were at record lows. 

And because of the way loan servicers are compensated for forbearance, the senators said “it is possible that Wells Fargo was able to profit on each forbearance filing.”

“Wells Fargo’s history of taking actions without the consent of consumers is cause for serious concern that this is another systemic failure at the bank,” the lawmakers said in the letter. “Indeed, if these reports are true, they represent one more addition to a long list of inexcusable actions by Wells Fargo at customers’ expense.”

Wells Fargo spokesperson Tom Goyda said the bank did not have any specific comments on the letter, but regarding the issue in general said, “Customers placed in forbearance received notices of that action through multiple channels, and we removed them from forbearance upon their request.”

“In the spirit of providing assistance, we may have misinterpreted customers’ intentions in a small number of cases,” Goyda said. “In those limited cases, we are working directly with customers to ensure they were not harmed in any way.” 

The letter specifically asked the bank to answer how many borrowers it placed in forbearance who did not request it since March. It also asked if Wells Fargo was compensated for the forbearance activities and by how much, as well as what steps the bank took to notify consumers who had their loans placed into forbearance. 

Sens. Warren and Schatz asked Wells Fargo to respond “to ongoing concerns about the bank's ability to comply with the law and treat its customers fairly” by Aug. 12.