Gallagher & Associates Team

Gallagher & Associates Team

Saturday, August 28, 2010

Judge Slams Wells Fargo

A California federal judge has ordered Wells Fargo to refund $203 million in overdraft fees to customers affected by the bank's "unfair and deceptive" practice of clearing transactions from largest to smallest dollar amount.

U.S. District Court Judge William Alsup found that Wells Fargo acted wrongfully to trigger overdraft fees. Alsup said he is ordering restitution because Wells Fargo devised "a trap that would escalate a single overdraft into as many as 10 through the gimmick of processing in descending order. It then exploited that trap with a vengeance, racking up hundreds of millions off the backs of the working poor, students and others without the luxury of ample account balances."

At trial, internal bank documents were found which shows how Wells Fargo relied upon and encouraged overdraft fees. Research has found that overdraft fees have become the single largest source of consumer fee income for banks.

At Wells Fargo, overdraft fees are the second-largest revenue source for its consumer deposits group, generating more than $1.4 billion in California from 2005 to 2007, according to court documents.

Banks, including Wells Fargo, have long maintained that they clear large before small transactions to give priority to important payments for mortgages and cars. But this also generated more fees because it empties the bank account more quickly.

Saturday, August 14, 2010

Florida Foreclosure Stats

Recent statistics show that Florida leads the nation in foreclosures in first half of 2010.

Florida led the nation in foreclosures in the first six months of the year, according to new data released in July.

The Miami Fort Lauderdale area received more foreclosure-related warnings in the first half of this year than any other, foreclosure listing firm RealtyTrac Inc. said.

Florida accounted for nine of the top 20 metro areas with the highest foreclosure rates.

Pitfalls of Mandatory Foreclosure Mediation

Generally, the Florida supreme court order outlining new procedures to expedite foreclosure cases has been helpful to borrowers. However, there is one major concern for the borrowers under these new procedures which is the requirement of borrowers to furnish private financial information to lenders prior to mediation.

Lenders are requesting the full disclosure of private financial information from borrowers prior to mediation, yet the lenders furnish no information regarding their financial stability. Normally, personal financial disclosure is given during discovery in aid of execution after a judgment has been rendered. Florida Rules of Civil Procedure 1.560 allows for a judgment creditor to seek discovery to help execute his or her judgment. In addition, a judgment creditor is allowed broad discovery into the debtor’s finances. Appley's Tru-Arc, Inc. v. Liquid Extraction Systems Ltd. Partnership, 526 So.2d 177, 179 (Fla 2d DCA 1988). However, at the point of mediation in these foreclosure cases there has been no judgment. We believe the compulsion of borrower’s private financial information to be in contravention of Florida law.

Personal finances are among those private matters kept secret by most people. Rappaport v. Mercantile Bank, 17 So.3d 902, 906 (Fla. 2d DCA 2009). In Florida, there is a general rule that personal financial information is discoverable only in aid of execution after a judgment has been entered. Friedman v. Heart Institute of Port St. Lucie, Inc., 863 So.2d 189, 194 (Fla. 2003). Furthermore, the trial court should be “sensitive to the protection of a party from harassment and from an overly burdensome inquiry.” Tennant v. Charlton, 377 So.2d 1169 (Fla., 1979). Courts have to be mindful that the exposure of personal financial affairs may be used by plaintiffs trying to coerce a settlement against an innocent defendant. Tennant v. Charlton, 377 So.2d 1169, 1170 (Fla., 1979).

Additionally, courts have to analyze whether the financial information sought is relevant to the matters being litigated as the disclosure of personal financial information during discovery may cause irreparable harm to the person forced to disclose it. Friedman v. Heart Institute of Port St. Lucie, Inc., 863 So.2d 189, 194 (Fla. 2003). The Florida Constitution protects the financial information of individuals if there is no relevant or compelling reason to compel disclosure. Spry v. Professional Employer Plans, 985 So.2d 1187, 1 (Fla. 1st DCA 2008). Thus, a party seeking private financial information must provide evidence to show that the information is relevant. Id. The relevance of financial information should be determined only after an evidentiary hearing. Id.

Thus, it is perplexing that under the new mediation rules for foreclosure cases that a borrower is required to submit private financial information to the lenders when the lenders do not have a judgment against them. The relationship at the time of mediation is not yet one of judgment creditor to judgment debtor. Furthermore, Florida even has a right to privacy set forth in its own constitution which “expresses a policy that compelled disclosure through discovery be limited to that which is necessary for a court to determine contested issues.” Rappaport v. Mercantile Bank, 17 So.3d 902, 906 (Fla. 2d DCA 2009). At the time of mediation, the borrower’s financial solvency and net worth are not being contested nor adjudicated.

Moreover, the lenders assumed the risk of initiating a loan at the loan’s underwriting stage. Thus, there is nothing in the note or mortgage that requires the disclosure of personal financial information after the loan’s inception. The disclosure of financial information by the borrowers is an invasion of privacy and may cause irreparable harm. As such, we are strongly opposed to the compelled disclosure of personal financial information without any legal basis for such disclosure.