A proposed class action alleges PNC Bank has taken advantage of mortgage borrowers who opted to defer payments amid the COVID-19 pandemic by improperly adding the total past-due amounts to the outstanding principal balance of their loans.
The 29-page complaint alleges that although PNC entered into deferral agreements with certain borrowers, allowing them to bring their mortgages current during the pandemic and delay repayment of certain past-due monthly principal and interest payments, the bank “double-charged” these consumers and improperly increased the amount of their mortgages by tacking onto the principal balance the amount of any missed payments. Moreover, the suit alleges PNC also double-charged borrowers who subsequently paid their deferred loan amounts for past-due interest that the bank had previously agreed to defer.
According to the case, PNC has wrongfully applied a portion of each customer’s monthly payment to pay down the principal pursuant to an amortization schedule. When a customer misses a monthly payment, the complaint says, this should not increase the outstanding principal by the unpaid principal amount. The principal amount remains the same and “just has not been reduced,” the suit stresses.
In this scenario, the only additional amount owed by the customer would be the accrued interest and, if applicable, penalties, the case says, highlighting the following example:
“For example, assume a person owes $100,000 and has agreed to pay back the loan in $10,000 monthly installments. If that person misses the first $10,000 payment, the person does not suddenly owe $110,000. The person still owes $100,000 in principal plus any accrued interest and penalties. But what PNC is doing is the equivalent of improperly adding the $10,000 missed-payment to the outstanding principal balance and increasing the mortgage loan to $110,000.”
The lawsuit charges PNC has run afoul of the federal Truth-In-Lending Act (TILA) “in at least three ways.” Per the case, the TILA requires PNC, as the creditor or servicer of the mortgage loan, to provide periodic mortgage statements that accurately disclose the amount of the outstanding principal balance under the mortgage. The mortgage statements provided to proposed class members included, and, for those who have not paid off their mortgage yet, still include, “inaccurate and inflated principal balances,” the suit alleges.
Second, the law requires PNC to disclose in its mortgage statements the existence of any prepayment penalty it might charge. The case claims PNC did not disclose to borrowers that if deferred amounts were paid off early, there would be a prepayment penalty in the form of the alleged double-charging on the deferred interest.
Third, although the law requires PNC to provide borrowers, upon request, with an accurate statement of the total amount required to pay off a loan by a specified date, the bank instead provided proposed class members with inaccurate and overstated payoff statements as a result of the alleged practices at issue, according to the suit.
The complaint goes on to allege PNC has also violated the Maryland Consumer Protection Act by:
Misrepresenting that its deferral agreements would only “delay” or “defer” the payment of the past-due amounts and that deferral would not change any other terms of a mortgage;
Improperly adding the total amount of past-due monthly payments to the outstanding principal balance and overstating the outstanding principal obligation on PNC’s monthly mortgage statements and account records;
Failing to disclose that it would increase the principal balance owed as a result of the payment deferral;
Overstating the amount owed on the mortgage loan at the time of repayment or refinance;
Failing to disclose that the customer would be double-charged the deferred interest amount if the deferred amounts were repaid early;
Providing inaccurate payoff statements; and
Collecting and failing to refund overpayments, including overpayments on principal and interest.
The suit looks to represent all persons in the United States who entered PNMA COVID-19 Payment Deferral Agreements with PNC and who had their total deferred payments added to the outstanding principal balance on their mortgage loans.
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