Wells Fargo Bank NA was accused in a lawsuit of charging inflated premiums when it procures "force-placed" property insurance for homeowners whose coverage has lapsed.
“The premiums are inflated to cover kickbacks in the form of unearned commissions and bundled administrative costs not properly charged to the consumer,” Florida homeowner Ira Fladell said in a complaint filed yesterday in federal court in Fort Lauderdale, Florida.
Fladell, seeking unspecified money damages, claims the bank breached its contract with him and acted in bad faith. He also said the lender bought a flood insurance policy on his Pompano Beach home while his own coverage was still in effect. Fladell, a lawyer, is seeking class-action status on behalf of all borrowers in the same situation.
Ancel Martinez, a spokesman for the lender, didn’t immediately reply to a voice-mail message seeking comment on the lawsuit.
Wells Fargo & Co., the San Francisco-based parent company of the Wells Fargo bank, today agreed to pay $125 million to the U.S. to settle unrelated allegations of bias against minority borrowers.
Shares fell 42 cents to $32.85 in New York Stock Exchange composite trading.
Fladell’s filing came on the same day a U.S. judge in Oregon ruled that another class-action lawsuit raising similar allegations against a unit of Charlotte, North Carolina-based Bank of America Corp (BAC). can go forward on two of seven claims.
U.S. District Judge Michael Simon in Portland said borrowers Ronda and Larry Arnett could proceed with breach of contract and conversion claims, while he threw out allegations of unjust enrichment and breach of fiduciary duty.
The Arnetts, like Fladell, said they had flood insurance coverage in force when the bank declared they were under- insured, procured a policy for $250,000 coverage, the same amount as the old one, then billed the Arnetts’ escrow account for the $2,448 premium, according to Simon’s ruling.
They claim the bank forces class members to buy and maintain flood insurance in amounts exceeding the requirement of U.S. law and greater than the lenders’ secured property interests.
The judge said in his ruling that the premium money has been refunded. Still, the contract language the bank allegedly relied upon to deem the borrowers under-insured was ambiguous, he said, denying the bank’s bid for judgment in its favor.
“Bank of America is pleased the court dismissed five of the plaintiffs’ seven claims and intends to continue its defense of the remaining claims against it,” Shirley Norton, a spokeswoman for the lender, said in an e-mailed statement.