A proposed class action alleges Equifax Information Services has harmed mortgage borrowers receiving COVID-19 relief from Wells Fargo by unlawfully reporting nonpayment authorized by the lender as a negative remark on their credit scores.
The 14-page lawsuit claims Equifax has run afoul of the federal Fair Credit Reporting Act and, in the process, harmed consumers’ credit scores, thereby jeopardizing their access to credit during a time of financial uncertainty. According to the complaint, Equifax could have avoided the harm it’s alleged to have done to thousands of Wells Fargo mortgage borrowers nationwide had the credit reporting agency “exercised even a modicum of reasonable care.”
“Given the mass economic impact caused by the Pandemic, it was common knowledge that mortgage lenders, and other creditors, were placing mortgages into suspension in response to the Pandemic and payment,” the complaint says. “However, rather than doing its due diligence, as required by the FCRA, Defendant reported thousands of loans held by Wells Fargo for nonpayment. This resulted in thousands of borrowers suffering a decrease in their credit score, when no payment was due on those mortgages.”
According to the lawsuit, Wells Fargo, in response to the COVID-19 pandemic, offered more than 964,000 mortgage borrowers short-term payment suspension for a three-month period. As part of the short-term suspension, the bank agreed that it would not charge late fees or report additional missed payments to credit bureaus, the case says.
The lawsuit goes on to claim that Wells Fargo unilaterally suspended payment on non-delinquent mortgage accounts without requiring a borrower’s consent and placed accounts into forbearance via email or phone requests, even if a customer did not explicitly request a forbearance. Moreover, Wells Fargo, according to the suit, also placed accounts into COVID-19 forbearance when consumers began, but did not complete, requests for pandemic relief.
According to the case, the plaintiff’s monthly mortgage payments were suspended from mid-April through July 1, 2020, and Wells Fargo allegedly promised it would not report the payments missed during the suspension to credit bureaus. The suit claims a 16-point drop in the plaintiff’s credit score in June 2020 was the result of Wells Fargo erroneously reporting the plaintiff’s mortgage suspension. Although Wells Fargo removed any negative remark regarding the suspension the following month, Equifax has nonetheless failed to rectify the plaintiff’s credit score, despite being informed by Wells Fargo that the negative mortgage remark “contained false and patently inaccurate information regarding his credit history,” the case says.
The lawsuit additionally claims that the plaintiff continued to pay his mortgage in a timely manner during the time in which payments were suspended by Wells Fargo.
According to the suit, the plaintiff’s Equifax credit report creates a materially misleading impression regarding the consumer’s creditworthiness. The filing alleges Equifax failed to adjust its credit scoring algorithm to account for relief provided to consumers with mortgages impacted by the pandemic.
“Rather than treating the suspension of borrowers’ payment obligations as a score-neutral or score-positive event, the credit scoring algorithm used by Equifax treated the relief afforded to mortgagors as a negative event,” the case claims.
The case detailed on this page looks to represent all U.S. residents about whom Wells Fargo furnished credit information to Equifax pertaining to mortgages held in suspension due to the COVID-19 pandemic.
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