In a move that could come back to haunt them, Wells Fargo (NYSE:WFC) sent a letter to a client saying her home equity line of credit had been suspended based on her credit rating.
The problem was her credit rating was actually very good, and the only blemish, which had been disputed, was a $28 payment she had allegedly been late on, but had been paid in full after some disagreement with the bank about it even happening. Even so, her credit rating was still very solid, yet a letter stating this was the cause of her losing the home equity line of credit was sent anyway.
According to the letter sent to Marika Hamilton, Wells Fargo stated that they scan the credit of people on a consistent basis who have home equity lines of credit with them to ascertain whether they still qualify for it.
Evidently the problem is in the reasoning behind the suspension of her credit line. While Hamilton did indeed have the one blemish on her credit record, her credit ranking was still high, making it not look good for the bank and their reasoning behind it.
It seems like it may have been an overreaction by Wells Fargo who was looking for credit perfection, rather than the willingness and ability to pay. The strange thing is, while Hamilton had a home equity line of credit, she didn’t own anything on it when the credit line was suspended.
Hamilton alleges when she got together with a representative from Wells Fargo, it was implied the more she pushed this the more scrutiny all of her accounts would be put under; whether they were her personal or business accounts. Supposedly they said those accounts could possibly lose their credit too if she persisted.
Other lawsuits have been filed against Wells Fargo because of similar situations, where in some circumstances they suspended credit lines based on homes losing their value and consumers then not having the equity to back up the credit line loans. This is of course good business practice, but some of those having their credit lines shut down say the bank didn’t bother checking to see if their home values did in fact fall.
While lawsuits in the current home equity credit line crisis aren’t unusual in any way, and were expected the moment the government began using taxpayers’ dollars to bail out the banks and other huge businesses, this is different because of the attempt to bring it to class-action status.
Hamilton’s lawyer bases his case on the letter sent by Wells Fargo to her, stating that it was a generic letter which was sent to a large number of other Wells Fargo customers, giving the people a class suit against the giant bank.
It could take up to a year before a judge determines whether the case can go forward as class-action.
