Rochester, NY 8/22/2009 1:32:04 AM
WELLS FARGO & CO WFC, Class Action Suit in The Making?
WELLS FARGO & CO NEW
What if you worked on commission, had some good months, some bad ones, but then out of left field a software program, running on the servers of banking giant Wells Fargo, slashed your home equity line of credit. It would be pretty upsetting right? Sure it would and that's what (allegedly) happened to Michael Hickman, a Chicago commodities broker, whose family depended on that ELC.
"I work on 100% commission," Hickman said. "I have months of good, and I have months of bad. I also have a special needs daughter at home, and I need to be able to plan for her care. We wanted to know we had peace of mind... "
The wheels of misfortune apparently turned against Mr. Hickman's situation, since he is the lead plaintiff in a lawsuit against WFC, stating they literally yanked the rug from under him by slashing his home equity line of credit. Why? Because that's what the computer told them to do, and if it's sitting on a computer monitor, it must be right, or perhaps it could be "garbage in, garbage out".
The lawsuit is designed to be a class-action suits that could possibly have thousands of people (borrowers) who, like Mr. Hickman, suddenly found themselves without the security and cushion of their home equity line. The technical term for what happened is called "automated valuation models", but it does make you yearn for the banks of yesteryear who could look you in the eye and say, "I believe you're good for it."
"They told Congress they were going to use that money to free up credit lines," said Hickman's attorney Jay Edelsen of Chicago law firm Kamber Edelsen. "But instead they systematically shut down credit lines, illegally.
"They used these automated methods that can be easily rigged to suggest houses are worth less than they are, and they used that as a pretext for shutting down credit lines.
"They are happy to take taxpayer money," Edelsen said, "but they don't feel any obligations to their customers or their country, and that's what's killing the economy right now."
I don't know what is up with the banking unit of Wells Fargo & Co. (WFC: 27.84, 0.36, 1.31%). But lately, when I have a question about news like this, its spokesman, Kevin Waetke, doesn't return my calls.
Instead, he sends a carefully prepared statement that may have been written by the same computer that does the automated valuations.
"We are confident in our fair and responsible lending practices," the statement said. "While we are beginning to review the lawsuit, from what we have read so far, it appears to mischaracterize credit controls designed to sustain homeownership."
Of course there are many and sundry law suits being filed everyday, some against Wells Fargo, some against other banks, but truth be told, many of us have felt the pain of plummeting home values in the last few years. It's certainly possible that banks (both big and small) must adjust their "lines of credit" in order to stay solvent.
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