9th Circuit: Dual-Tracking Of Homeowner Making Prompt Payments Under Loan Modification Agreement Constitutes "Adverse Action" That Triggers Bankster's Duty To Give Notice Within 30 Days Under Federal ECOA

In San Francisco, California, Bloomberg reports:

• Wells Fargo & Co. (WFC) must face borrowers’ claims that it violated the Equal Credit Opportunity Act by starting foreclosure proceedings while the customers were making payments under a loan-modification agreement.
  
  The U.S. Court of Appeals in San Francisco [] reinstated the claims of John and Carol Schlegel, who received default notices after the bank told them to proceed with payments under a loan-modification plan and failed to respond to their inquiry seeking an explanation.
  
  The bank’s action, the court found, constituted a revocation of credit without notice required under the Equal Credit Opportunity Act, which makes it illegal for creditors to discriminate against applicants and requires them to provide an explanation within 30 days when denying or revoking credit or changing credit terms.
  
  “While sending a mistaken default notice would not necessarily constitute an adverse action, the Schlegels’ complaint describes egregious conduct that goes far beyond clerical error,” the three-judge panel said.
  
  The bank sent five default notices before acknowledging the modification agreement was in effect and the notices were incorrect, according to the ruling. The panel sent the case back to federal court in San Francisco. The Schlegels had sued on behalf of themselves and other borrowers.
  
  Jennifer Temple, a spokeswoman for San Francisco-based Wells Fargo, didn't immediately respond to an e-mail seeking comment on the ruling.

Source: Wells Fargo Must Face Foreclosure Suit After Loan Accord.

For the ruling, see Schlegel v. Wells Fargo, No. 11-16816 (9th Cir. July 3, 2013).