(TheNicheReport) -- Does anyone know what’s happened at Wells Fargo Bank? If so, please let the rest of us know, because in a line-up of TBTF bank CEOs, to stand out as being particularly awful is no easy task… and yet Wells Fargo’s CEO, John Stumpf has risen to the challenge and then some.
At the beginning of April of this year, Judge Elizabeth Magner, a federal bankruptcy judge in the Eastern District of Louisiana, characterized Wells Fargo’s behavior as being "highly reprehensible." Think about that for a moment. That means that the judge decided that to describe Wells Fargo as merely “reprehensible,” wasn’t enough.
Wow, that is something. Can you imagine someone saying that about you… a federal judge, no less? I’m thinking that if a federal judge ever has the occasion to describe my behavior as being worse than “reprehensible,” I’m going to jail for a long time.
Of course, no danger of anything like that happening here… bankers don’t go to jail in this country, everyone knows that. But, in this instance, after more than five years in litigation with a single homeowner, Judge Magner ordered Wells Fargo to pay the New Orleans man $3.1 million in punitive damages.
Now, if that sounds like a paltry sum for the likes of Wells Fargo, that’s only because it is. And that it represents one of the largest fines ever levied related to mortgage servicing misconduct hardly makes it feel any better.
It’s kind of like being forced to eat dog turd ice cream, but finding out that it’s okay if you pour motor oil on top. Does that improve your circumstances? I guess so, but…
Judge Magner, in her opinion, wrote…
"Wells Fargo has taken advantage of borrowers who rely on it to accurately apply payments and calculate the amounts owed, but perhaps more disturbing is Wells Fargo's refusal to voluntarily correct its errors. It prefers to rely on the ignorance of borrowers or their inability to fund a challenge to its demands, rather than voluntarily relinquish gains obtained through improper accounting methods."
So, what was Wells Fargo doing exactly? Well, they were systematically over-charging the people least able to do anything about it… those filing bankruptcy. In this case, Wells Fargo improperly charged the borrower $24,000 in fees, but it wasn’t done by hand, it was the bank’s automated systems doing precisely what they were programmed to do. Like, anything but an isolated incident.
After the borrower fell into default on his mortgage, Wells Fargo’s automated system began applying his mortgage payments to interest and fees that had accrued instead of to principal, as required by his servicing contract, which in turn led to him being charged with a virtual waterfall of additional fees and interest. And even after the borrower filed bankruptcy, Wells Fargo continued to misapply his payments, according to Judge Magner’s written opinion.
And why wouldn’t they? I know, it sounds weird to say it, but I think I would have been disappointed had Wells stopped there.
There’s even a terme de l'art for this scenario used by consumer lawyers… they call it a “rolling default.” I suppose the name refers to the idea that once the scheme gets rolling, it’s all downhill from there. I think it should be called a “boiling default,” because once it’s boiling, you’re goose is most assuredly cooked.
Or, wait a minute… hang on… how about we call it: “Getting Stumpfed.”
(Come on, admit it… I’m good.)
Judge Magner went on to describe Wells Fargo's litigation tactics as involving the filing of dozens of briefs, motions and other filings clearly designed to slow down legal proceedings to such a point that anyone thinking of mounting a legal challenge against a bank quickly finds it essentially impossible.
And since it’s only through costly litigation that the insidious crimes of Wells Fargo become apparent, all the bank has to do is prevent those with limited resources from doing what they can’t do with limited resources. Now there’s a winning business model for you. Like making billions by stopping blind people from seeing.
What sort of a company engineers this sort of strategic core competency anyway? Remember Ford’s infamous Pinto strategy… rather than fix the problem, just settle them as they exploded? Well, this Wells Fargo stuff makes that look as benevolent as Girl Scouts selling cookies after church.
Wells Fargo actually engineered a strategy and built a system to rampantly abuse the individuals in our society least able to defend their interests. This is a bank that deserves to have a statue erected in its likeliness and even its own Lazarus-styled sonnet. I’m just thinking out loud here, but how about…
“The Statue of Larceny”
And inside the base, engraved on a bronze plaque, could be these words…
Give us your jobless, injured, bankrupt filers, whose lawyers won’t work free.
The wretched refuse against whom in court we’ll always score.
Send them one by one, homes all sold by substitute trustee,
We’ll rape them, rob them, force them out Wells Fargo’s golden door.
Not bad, right? No? Sheesh… tough crowd.
Judge Magner, in an interview with Ben Hallman of Huffington Post, said that she personally analyzed the loan files of twenty borrowers in her court and found supposed “errors” in every single instance. So, at least we know the systems are working properly, and somehow I find that oddly reassuring.
I don’t know why but there’s something even more terrifying about the idea that we might be getting ripped off by banks in an entirely random way. Like one day you get hit for a hundred… and the next day not only is your entire IRA gone, but two weeks later you learn that the bank bounced one of your checks to the IRS for the penalty on the early withdrawal.
I know, right? Now, that would be rude.
I guess I only have a couple of questions I’d like to ask, and the most obvious is: Why would anyone whose read about this decision continue to bank at Wells Fargo?
I mean, if they do this sort of thing systematically… AND THEY UNQUESTIONABLY DO, how do you know where the other spots are that are picking your pocket for twenty here and twenty there. Because you’re not going to tell me you think this case has uncovered the only place at Wells Fargo where this sort of thing goes on, are you? Come on…
And, my second question is: What do our elected representatives do these days… I mean specifically? State or federal, I don’t care which… you pick. Because it kind of seems like we’ve quietly been transformed into a lawless society in many ways, don’t you think?
Like in this bankruptcy case… the judge has uncovered the systematic stealing from the defenseless, but it’s not like it’s a major news story, or anything. To the contrary, it’s nowhere. Doesn’t anyone but me find that amazing? How do they do that? Where have all the journalists gone?
I can tell you that I receive more complaints about Wells Fargo refusing to approve loan modifications than any three other mortgage servicers combined. But then, Wells did modify one of the homeowners I wrote about a few months back. I don’t know why, maybe it was an accident.
Here’s one more thing Judge Marner said about Wells Fargo in her written opinion…
"These are loans of working-class people who bought homes they could afford and whose loans were not administered correctly from an accounting perspective," Judge Magner said. "I think that these types of problems occur in almost every [defaulted] loan in the country."
So, Mr. John Stumpf… Wells Fargo’s CEO… you just go ahead committing those criminal acts with impunity. Don’t change now… go down with your ship. Besides, I’m sure there are deceptions your people haven’t thought of yet.
Do you have a program that targets autistic children yet? Or what about something abusive for unmarried pregnant girls that never finished high school? Or, what about the elderly, are you doing enough to take advantage of the elderly?
I’m sure you’ll think of something, which is why I’ve told my wife and daughter to stay out of banks for the foreseeable future. We only make deposits at the ATM at night, which may sound crazy, but I’m betting will one day soon prove considerably safer than being inside during the day.
Lo siento. Que se mejore pronto.
Martin Andelman is a staff writer for The Niche Report. He also writes an almost daily column on ML-Implode called Mandelman Matters. He also publishes a Monthly Museletter and you can follow “Mandelman” on Twitter. Send your responses to Martin@TheNicheReport.com.