Friday, December 6, 2013

Wells Fargo Bank lawsuits on credit cards in Texas courts



Wells Fargo Bank, N.A. is a major national bank headquartered in Sioux Falls, South Dakota. It is a prolific litigator in Texas courts. In Harris County, for example, a party search on the district clerk’s website yields more than 3000 cases filed in the county's civil district courts. A large proportion of these, however, are foreclosure cases, and some are garnishment cases that are docketed separately even though they arise from a previous lawsuit. 
This post will focus on credit card debt suit involving cards issued by Wells Fargo Bank, N.A. (“Wells Fargo” or “WFBNA”). It should be noted, however, that Wells Fargo also sues on Personal Loan Agreements, and that those lawsuits have a number of distinct characteristics. For one, the underlying contract and TILA disclosures look different. As is true of other major banks, there are other entities with similar sounding names. See FDIC listing below.    
Like Discover Bank and American Express, Wells Fargo sues as original creditor to collect money owed on defaulted credit card accounts (rather than selling them off to debt buyers, a practice Chase Bank USA, N.A. is known for). Wells Fargo utilizes one major lawfirm to sue customers in Texas: VINCENT LOPEZ SERAFINO JENEVEIN, P.C. ("VINCENT"). Mark Rechner and Thomas Sellers are the attorneys on the pleadings.
Wells Fargo cardmember agreements (which the bank calls customer agreements) are extremely verbose. A pro se litigant who appealed an adverse judgment recently complained that she could not make sense of it even though she had a college degree and other people of similar level of education could not understand it either. Card agreements, of course, are written by lawyers for other lawyers, especially the select number of lawyers known as judges. After all, banks want to make sure they win if they are sued by aggravated customers, not to mention hordes of them being rounded up for a class action. Cardmember agreements are carefully drafted, so as to give as much leverage to the creditor, but to also hold up in count. 
Wells Fargo, of course, might disagree, and point to the section of the contract that even offers translated versions in various languages as proof that it is very customer-oriented. -- > Bank documents in Spanish and other foreign languages
That said, once a WFB cardmember agreement becomes an exhibit in litigation, it offers a convenience factor that somewhat compensates for the excessive length: the sections are numbered, thus making it easier to reference them, if necessary to support an argument by the defense. Other CMAs, but contrast, are much harder to deal with, and are often not even legible because the font of the fine print is too small, and the quality of the reproduction poor. Chase and HSBC argreements are notorious for this problem. 
Wells Fargo Cardmember Agreement: Two Parts
A standard Wells Fargo credit card contract actually consists of the multiple parts: The cardmember agreement proper, which has the unwieldy title "CONSUMER CREDIT CARD CUSTOMER AGREEMENT & DISCLOSURE STATEMENT VISA® OR MASTERCARD®" (“Customer Agreement”), and an additional credit terms document that contains TILA disclosures and is referred to as "Important Terms Of Your Credit Card Account" (“Terms Document”), which is found on the enclosed letter/card carrier. A third component is also mentioned: any subsequent disclosures, but, depending on the age of the account by the time it went into default, there may not have been any such supplemental change notices. All accounts must have the additional Terms Document, however, because that document contains the credit terms that federal law requires to be set forth in writing when the account is opened, and the Wells Fargo customer agreements do not contain all of the material terms. -- > Truth in Lending Act (TILA) Disclosures 
The division of the contract into two components makes sense. The Customer Agreement is generic and covers a large segment of the customer base (possibly even all of them at a particular point in time), while the Terms Document will vary across the population of customers as it will reflect differential pricing (higher or lower interest rates and other terms) for individual segments reflecting different cardholders' creditworthiness and credit utilization patterns. The industry calls this risk-based pricing, but risk-management is not the only reason. Banks want to maximize profits by charging interest rates as high as the market (customers) will bear.   
What happened with the Terms Document? (TILA Disclosures)
The first paragraph of the Customer Agreement incorporates the Terms Document by reference, but the Terms Document itself is typically omitted when Wells Fargo moves for summary judgment. Counsel for the Defendant may thus want to point out to the court that the plaintiff has failed to prove up the essential terms of the contract, and cite the Williams v. Unifund case in support. The argument may not always carry the day, but it is legally sound under existing case law, and worth making. 
Choice of law: SD
Although Wells Fargo Bank is associated with the West Coast, the contractual choice of law in its Customer Agreements is South Dakota. WFBNA moved its headquarters from SAN FRANCISCO, CA to SIOUX FALLS, SD in 2004. Other Wells Fargo entities are located elsewhere, including one in Texas. See FDIC list at the bottom of this page. The reason major national banks choose South Dakota is the favorable legal climate there: No limits on interest rates that may be contracted for. Citicorp, based in New York, did the same thing, and is running its credit card operation out of South Dakota through Citibank, N.A., and previously Citibank (South Dakota) N.A..  
The Wells Fargo choice-of-law paragraph states as follows: 

This Agreement and your account, as well as our rights and duties and your rights and duties regarding this Agreement and your account, will be governed by and interpreted in accordance with the laws of the United States and, to the extent applicable, the law of the State of South Dakota, regardless of where you reside or use your account at any time.
Arbitration clauses 
Wells Fargo credit card agreements contain arbitration provisions for arbitration under the FAA, though South Dakota law is also mentioned. Under the terms of the arbitration agreement, either the customer or the bank may submit a dispute to binding arbitration at any time notwithstanding that a lawsuit or other proceeding has been previously commenced. 
This clause allows WFBNA to opt for arbitration when the customer answers the debt suit with a counterclaim; or to quash a lawsuit when sued by a consumer independently, but it also allows the cardholder to assert the arbitration provisions as a defense in a debt collection suit brought by the bank against him or her.  -- > Invoking arbitration agreement whensued for credit card debt
This is what a typical arb agreement looks like:

Billing Disputes
Disputes about charges on account statements are handled through Wells Fargo Card Service with a PO address in Des Moines, Iowa.
Payments, however, must be sent to a different address for the same entity in Los Angeles, California.

In Texas, debt collection suits involving Wells Fargo credit card accounts are filed by VINCENT LOPEZ SERAFINO JENEVEIN, P.C., a lawfirm based in Dallas.
The standard VINCENT pleading typically ignores the choice-of-law issue, and invokes theories of recovery which are not even viable for collection of a credit card debt (which requires written credit terms under federal and state laws regulating the banking sector). 
Those theories are unjust enrichment and money had and received, but Wells Fargo's attorney does not move for summary judgment on those theories. Therefore; it is not worth complaining about them.  -- > equitable theories; -- > express contract preclusion of equitable claims; -- > special exceptions to challenge the opponent's pleadings

Legal fees in addition to the amount claimed as due on the account 
Attorney’s fees are typically also requested in petitions filed by VINCENT, based on a Texas statute, rather than a South Dakota one. The amount sought in the trial courts is typically moderate (less than $1,000), but much higher contingent attorney’s fees are requested should the consumer unsuccessfully appeal an adverse judgment ($5000 for each level of appeal). -- > Comparison of attorney fees claims in debt collection suits 


WFBNA attorney Mark Rechner of VINCENT LOPEZ SERAFINO JENEVEIN, P.C., typically moves for summary judgment with an affidavit of a Wells Fargo representative located in Iowa (e.g., Jessica Rogers, Melissa J. Blair,Mandy E.L. Wagner); a copy of a CONSUMER CREDIT CARD CUSTOMER AGREEMENT & DISCLOSURES STATEMENT (see description above); and a few monthly account statements. There is no bill of sale as they appear in suits by assignees such as Midland Funding, LLC or CACH, LLC because WFBNA sues itself as original creditor on defaulted accounts (although there are exceptions). -- > Lawsuits by assignees on Wells Fargo bank debt 
The affidavit, which also functions as a business records affidavit, will normally recite the date of account creation, but the Customer Agreement will typically be of much more recent vintage (e.g., 2010). Typically, the TILA Disclosure document (the Terms Document as discussed above) will not be attached as a summary judgment exhibit even though the Customer Agreement states that it is part of the customer's contract with Wells Fargo Bank and is referenced numerous times in the small print.   
Unlike final account statements from Target NB, Capital One, and Citibank, the last Wells Fargo account statement will typically not reflect acceleration of maturity; i.e. it will show an amount due on a date a few weeks after the end of the current billing cycle that is significantly less than the amount of the revolving balance (or it may show chargeoff without prior acceleration of maturity and zero balance). Additionally, the last statement will show how much of the minimum payment amount represents the past-due amount.
If the last monthly statement is deemed admissible for the truth of what is expressly set forth on it (based on the business records affidavit), it would not support the proposition that payment was due in full. If the affiant testifies otherwise, the conflict in the evidence should preclude summary judgment, in addition to raising an issue of credibility. Wells Fargo's counsel may argue in reply that the card agreement authorizes acceleration (with reference to paragraph 25 titled "DEFAULT / IMMEDIATE REPAYMENT OF BALANCE IN FULL"), but even if the contractual basis for this lender remedy is established, the conflict in the evidence should still preclude resolution of the case by summary disposition. The last statement would only support a claim for the past-due portion of the minimum payment amount as damages caused by breach consisting in cessation of monthly payments by the cardholder. 
Additionally, if there is no showing of acceleration of maturity prior to the lawsuit, defendant's counsel may assert that the presentment requirement has not been satisfied for attorney fee purposes under Chapter 38 of the Civil Practice and Remedies Code. This issue should be raised in the answer (or amended pleading) in the form of a specific denial that Plaintiff has met the conditions precedent for fee recovery.


FIA Card Services N.A. suing on Bank of America credit cards 


Wells Fargo entities listed on FDIC web site
Wells Fargo Bank, National Association: Institutional History
Wells Fargo Bank listing on the Comptroller's National Bank List
OCC website (November 2013 version)

1 comment:

  1. First of all, wonderful site.

    Thought you might be interested to know and good to mention that they are now having Johnson, Deluca, Kurisky, & Gould step in to handle counterclaims, even if the original suit was Vincent.