According to a proposed class action, Equifax Information Services, TransUnion, and VantageScore Solutions have unlawfully included in consumers’ credit reports nonpayment of mortgages pursuant to COVID-19-related agreements with their lenders.
The 13-page lawsuit argues that although many lenders have offered forbearance, deferral or suspension of loan payments amid the “economic devastation” caused by the COVID-19 pandemic, the defendants have reported such as negative marks on consumers’ credit reports, lowering their scores and jeopardizing their access to credit in “a time of increasing financial insecurity.”
“These and other harms could and should have been avoided had Defendants exercised even a modicum of reasonable care,” the complaint scathes.
In response to the COVID-19 crisis, non-party Wells Fargo offered mortgage borrowers a three-month payment suspension and agreed to not charge late fees or report additional missed payments to the credit bureaus, the case relays. Given the “mass economic impact” triggered by the pandemic, such suspensions offered by creditors and mortgage lenders were “common knowledge,” the lawsuit argues.
Although Equifax and TransUnion, described in the suit as “the leading personal credit reporting agencies in the nation,” and Vantage, their jointly owned subsidiary, were required by the federal Fair Credit Reporting Act (FCRA) to ensure reported mortgage information was accurate, the defendants reported thousands of Wells Fargo loans for nonpayment.
The plaintiff, whose mortgage payments were suspended by Wells Fargo between April 15 and July 1, 2020, says a credit report issued by Equifax on June 6 stated his credit score had dropped by 16 points. Although a note appeared on July 25 stating that a remark by “Wells Fargo Home Mortgage” had been removed from the account, the plaintiff’s credit score did not adjust to reflect the correction, the suit says.
According to the case, Equifax and TransUnion failed to adjust their jointly developed Vantage Score algorithm to account for relief provided to homeowners during the COVID-19 crisis.
“Rather than treating the suspension of borrowers’ payment obligations as a score-neutral or score-positive event, the Vantage Score algorithm used by Equifax, Trans Union, and Vantage treated the relief afforded to mortgagors as a negative event,” the complaint reads, adding that consumers suffered a “precipitous, sudden, and predictable drop” in their credit scores as a result.
The case argues that the drop in the plaintiff’s and other borrowers’ scores was unjustified and based on “zero factual support.” According to the suit, if the defendants had given even “cursory attention” to the information lenders were reporting, they would have been alerted to “immediate, sweeping, and devasting” effects of their erroneous reporting.
The lawsuit goes on to allege that although the defendants had a “myriad of existing options” available that would have allowed them to accurately report mortgage loans and preserve consumers’ credit, they failed to use such tools, and instead relied on “antiquated systems and automated processes” that failed to account for financial institutions’ changes in response to COVID-19.
“Defendants could have easily reported accurate credit information using existing tools and procedures,” the suit says. “However, Defendants failed to do so.”
Alleging violations of the FCRA, the lawsuit charges the defendants’ failed to ensure “maximum credit accuracy” within consumer reports and ultimately counteracted the relief offered to consumers by mortgage lenders in the wake of the COVID-19 crisis.
The plaintiff looks to represent all U.S. residents about whom Wells Fargo furnished credit information to Equifax, TransUnion or Vantage Score pertaining to mortgages held in suspension due to the COVID-19 pandemic.
ClassAction.org’s coverage of COVID-19 litigation can be found here and over on our Newswire.