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Wells Fargo Created Millions of Fake Accounts
Wells Fargo created millions of fake bank accounts under consumer names between 2011 and 2015. By doing so, the Wells Fargo bank was able to meet targeted sales and collect more money in fees from their consumers who were unaware of these unauthorized accounts. It is noted that consumers were signed up for checking accounts and credit cards that they never agreed to open and pay fees on. Wells Fargo has said to have dismissed over 5,000 employees regarding this issue, suggesting this was a widespread problem and ingrained in the banks culture.
Over a million fake accounts are estimated to have been created by employees in consumers names. Employees allegedly created fake email addresses and fake pin numbers to enter these accounts into the system. Roughly a quarter of the accounts created without a consumer consent were credit card accounts. These credit card accounts jointly created a little under a half a million dollars in fees including interest charges, overdraft protection fees and annual fees. Wells Fargo does plan to compensate consumers involved in these fraudulent accounts.
So how does a fraudulent bank account effect a consumer?
A bank account developing fees that are going undetected by the consumer can continuously grow causing the consumer to have to pay more once detected. If never detected, then the consumer is accumulating debt. The unauthorized bank accounts also affect a consumers’ credit score as they are missing payments. A drop in credit could affect a consumers’ ability to take out a loan on items such as a car or mortgage for a home.
Wells Fargo creating unauthorized bank accounts violated the Truth in Lending Act (TILA). TILA expresses that consumers should be made aware of certain information when signing contracts related to credit cards and loans. Wells Fargo employees violated this act by never providing a contract for consumers to sign agreeing to the bank accounts and credit card accounts that were created. More information regarding the TILA can be found in 23 Legal Defenses to Foreclosure: How to Beat the Bank by Troy Doucet.
Truth In Lending Act
The Truth in Lending Act (TILA) is a federal law legislated on May 29, 1968 under the Consumer Credit Protection Act. The TILA was created to protect consumers involved in contracts with credited purchases with creditors and lenders. Essentially the TILA act enforces loan companies and credit card companies to provide all information regarding interest rates and other fees before a consumer agrees to borrow.
TILA covers open-ended credit and close-ended credit. Open-ended credit includes borrowed funds such as credit cards, debit cards and home equity loans. Examples of close-ended credit include auto loans and home mortgages. Information regarding terms of an Annual Percentage Rate (APR), the total amount offered in a loan and the frequency of due dates to repay the loan is now obligatory for the loaner to provide to the consumer under this act. The dispense of required information now allows consumers to be aware of contracts, costs of credit and so-called hidden fees. Consumers are also able to be more confident and comfortable agreeing to credit related contracts because they can use the provided information to compare a variety of loans or borrowed money.
Failure of cooperation by a loaner or creditor to provide the required information to the consumer can result in rescission in certain instances. The loan or credit transaction would be disentangled and canceled, and all fees and paid money would be returned back to the consumer in a rescission. Lenders and credit companies are more disposed and willing to provide the required information based on TILA due to the amount of loss which could generated during a rescission.
You can find out more information about the Truth in Lending Act (TILA) regarding home owners and foreclosure by reading 23 Legal Defenses to Foreclosure: How to Beat the Bank by Troy Doucet.
Right of Rescission
A borrower facing foreclosure has a number of defenses to losing his or her home. One such defense is the right of rescission. One can think of rescission as the ending of a contract or agreement. Under the Truth in Lending Act (“TILA”), 15 U.S.C. § 1635, a borrower has the right of rescission as to certain transactions including mortgage refinancing, a home equity line of credit, a home improvement plan, or any other non-purchase credit transaction secured by the borrower’s principal dwelling . However, TILA’s right of rescission does not apply to the purchase of a home.
TILA “requires creditors to provide borrowers with clear and accurate disclosures of terms dealing with things like finance charges, annual percentage rates of interest, and the borrower’s rights[.]” Barrett v. JP Morgan Chase Bank, N.A., 445 F.3d 874, 877 (6th Cir. 2006). See also 12 C.F.R. § 226.1(b) (“The purpose of this regulation is to promote the informed use of consumer credit by requiring disclosures about its terms and cost.”).
Normally, a borrower is allowed until midnight of the third business day after the consummation of the transaction or delivery of the required TILA disclosures to the borrower, whichever is later, to rescind the transaction. But if the lender does not provide the required TILA forms and disclosures to the borrower, the borrower’s right of rescission may extend up to three years. In other words, a borrower has an “unconditional right to rescind for three days,” after which the borrower has three years to rescind if the lender fails to satisfy TILA’s disclosure requirements. Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790, 792 (2015).
If a lender does not meet its TILA disclosure obligations and the borrower wishes to rescind the transaction within the three year time period, the borrower may do so by giving notice to the lender in accordance certain Federal Reserve Board regulations. For a borrower, a rescission of a transaction means the borrower is refunded all payments, fees, and costs, essentially placing the borrower in a position as if the transaction never occurred.
Can my credit card company sue me?
Troy Doucet is quoted in this Yahoo article about arbitration clauses. http://finance.yahoo.com/news/credit-card-company-sue-123048287.html
He would also point out that every so often arbitration clauses will be reciprocal, but that is rare and he has only seen it in commercial contracts. Even then, the clauses are usually limited in some respect or another.
If you have an arbitration clause you are worried about, please contact the attorneys at Doucet & Associates Co., L.P.A. by calling (614) 944-5219.
Best Foreclosure Defense Available to Consumers
TILA rescission is one of the best statutory consumer foreclosure defense because it enables homeowners to unwind their entire mortgage transaction and get a refund of nearly all money paid to the lender, including monthly interest and closing costs. A subset of TILA, called HOEPA, offers even greater benefits that can generate substantial damages for the homeowner.
To qualify, the loan must have been used for your primary residence and not be older than 3 years old (HOEPA loans can be longer). Most importantly, the loan must have been used to refinance the home. That is, the loan must be a refinance under three years old. If those things apply, you should have your loan evaluated for TILA rescission based on faulty disclosures.
Can My Credit Card Company Take Money From My Bank Accounts?
The short answer is no, your credit card company cannot take money out of your account without your permission or a judicial order. If you live in Ohio and your credit card company is taking money out of your account without your permission, call our consumer attorneys at (614) 944-5219.
The Electronic Funds Transfers Act (EFTA) in the Consumer Credit Protection Act (CCPA), codified at 15 USC 1693a, et seq., governs electronic fund transfers to and from accounts. It’s a very short Act, with the juicy provisions located towards the end of the chapter.
In particular, 15 USC §§ 1693e requires any preauthorization to be in writing to be valid. So, the credit card company can’t take money from your account unless you allow them to do so in writing. The only exception to this is when you authorize them over the phone for a one time debit to your account, as those transactions fall outside the act under 1693(a)(6)(E).
If you don’t give the credit card company authorization over the phone, then they can’t take your money unless they get your permission in writing (or have a court order). You cannot waive this written requirement, as stated in 1693l. Also, the credit card cannot condition the extension of credit on repayment by electronic transfer, as stated in 1693k.
The civil liability provisions of the act are located in 1963m. It provides for actual damages or up to $1,000, plus attorneys fees in a successful action. Because attorneys fees are provided under the statute, our firm may be able to represent you without out of pocket cost to you. Further, a party knowingly and willfully violating the act is also subject to criminal liability under 1693n.
If an unauthorized transfer occurs, your personal bank cannot hold you liable for amounts greater than $50 or the amount stated in 1693g in certain circumstances.
If you think you need to file a lawsuit about an unauthorized transfer, call us or take a look at the definitions in 1693a to ensure the act applies to all the parties, plus look at the implementing Regulation E, 12 CFR Part 205, et seq., as it implements the EFTA, or call our law firm if you live in Ohio.
The credit card company can take money from a deposit account with court authorization. However, it cannot use a cognovits (admission of liability) to obtain an immediate judgment without your permission. Cognovits are illegal under federal law in consumer transactions, as an unfair credit practice under 16 CFR Part 444.2, meaning creditors must resort to the judicial system set up in each state to enforce debts. That is, the credit card company must normally sue you in court, obtain a judgment, then collect on that judgment through the court system. This can take months to years, depending on whether you defend the lawsuit.
For example, in Franklin County Ohio, amounts over $15,000 are under the common pleas courts jurisdiction. Judges in that court report a case load of about 1,000 cases each due to the high number of foreclosures, meaning it could be over a year before you get a trial date (if you survive the preliminary motions and motion for summary judgment). Small amounts that are able to be litigated in small claims court may generate judgments much faster.
While the court can order a freeze on your bank account at the beginning of the lawsuit, this generally occurs only when the credit card company knows which bank you have assets and there is a likelihood the funds may not be there when the lawsuit is done. It process is rather unusual, and generally the credit card company will need to wait for a judgment before freezing your assets and then taking them. If the account is transferred to a collection agency, then the Fair Debt Collection Practices Act will probably kick in. That is available at 15 USC 1692, et seq. It does not apply to credit card companies collecting on their own debt, unless debt collection is their business. It offers great protections for consumers from harassing phone calls.
If you have limited (or no) assets and lots of debt, it is wise to at least have a conversation with a bankruptcy attorney. They can provide direction or help figuring out how to protect limited assets from creditors through bankruptcy. If you are in school and rely on student loans, it would be very wise to also talk with your financial aid office to determine what, if any, effects bankruptcy will have on your ability to continue in school (stemming from the ability to obtain financing). A Bankruptcy filing can eliminate your ability to qualify for grad-plus loans without a strong co-signor (over the government subsidized $20,500 per year).