By Rachel O'Brien

Law360 (October 22, 2020, 7:18 PM EDT) -- Wells Fargo urged a Virginia judge Wednesday to toss a putative class action that claims the bank illegally imposed forbearance plans on mortgages during the COVID-19 pandemic without the account holders' consent or knowledge, which the consumers say hurt their credit and chances to refinance.

Wells Fargo & Co. and Wells Fargo Bank N.A. pushed mortgages into forbearance during the coronavirus pandemic to provide financial relief to customers in compliance with the federal government's Coronavirus Aid, Relief and Economic Security — or CARES — Act, according to the July complaint.

Plaintiffs Gerald Forsburg, Jenna Doctor, Luis and Marisol Castro and Barbara Prado allege that they were harmed by the forbearance plans placed on their mortgages, which temporarily suspended their monthly payment obligations without their consent.

Their credit scores and credit reports were negatively impacted, they were unable to benefit from historically low interest rates and were prevented from getting full relief under the CARES Act, the lawsuit alleges.

Wells Fargo's motion to dismiss Wednesday said some of the claims brought don't apply to them as a servicer as opposed to as a direct lender, the suit fails to state a claim and Wells Fargo & Co. should be dismissed from the claims.

Plaintiffs allege that none of them requested a forbearance, some asked for it to be removed and even made payments to keep the loan current, despite the forbearance status.

Forsburg said Wells Fargo didn't inform him that placing the loan into forbearance would terminate his mortgage modification agreement, which carried a lower interest rate and gave him the ability to catch up on arrears he owed.

Doctor applied for a secured loan to cover medical expenses during the pandemic, but was rejected when the lending credit union made a "hard inquiry" with credit reporting agency Equifax and saw her mortgage was in forbearance, the lawsuit said.

The Castros wanted to refinance their mortgage, which was current in payments, with a lower rate but couldn't because it was in forbearance, a program they asked to be removed from, to no avail, according to the complaint.

Prado made on-time monthly payments for one mortgage from April through September 2020 but was unaware her second mortgage was in forbearance during that time, she said.

Later learning that both were placed in forbearance, she asked for the forbearance to be removed. She tried to pay what was owed on her secondary mortgage but "received confusing communication," and despite her payment, that loan wasn't brought current, the lawsuit alleges.

The class claims Wells Fargo committed fraud, breach of contract, gross negligence and defamation and  alleges violations of the Racketeer Influenced and Corrupt Organizations Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act and various laws in Texas, Florida and Virginia where the plaintiffs live.

Wells Fargo said Wednesday the claims for violations of the Real Estate Settlement Procedures Act should be dismissed because the customers don't have a private right of action to enforce the regulation, they didn't sent the requisite notice of error before filing a lawsuit and they don't allege cognizable damages.

Claims for Virginia common law civil conspiracy and statutory business conspiracy should be dismissed because the customers haven't sufficiently pled either claim nor alleged an independent wrong that occurred, Wells Fargo said.

Likewise, the racketeering allegation should be tossed from the suit because "plaintiffs have not sufficiently alleged the existence of an enterprise … and have not adequately alleged a pattern of racketeering activity" the bank said.

The common law fraud and gross negligence claims are barred by the economic loss doctrine under Virginia, Texas and California law, Wells Fargo said.

Claims of violations of the Texas Debt Collections Act fail because Wells Fargo is not a "debt collector" under the statute, the bank argued.

The claims under the California Rosenthal Act — the state analog to the federal Fair Debt Collection Practices Act — should be dismissed because the alleged unapproved forbearance isn't one of the prohibited practices of the acts, which bars debt collectors from engaging in unfair and deceptive acts, Wells Fargo argued.

"The [Second Amended Complaint's] attempt to cherry-pick a few enumerated predicate subsections to fit this fact pattern is unconvincing," the motion said.

As a loan servicer, Wells Fargo doesn't have a contract with any of the named customers, which means the plaintiffs' breach of contract claim fails, the bank argued.

The defamation charges stem from the claim that Wells Fargo purportedly provided false information to credit reporting agencies about the forbearance programs. Wells Fargo argued that the claims fail because the Castros and Doctor "do not plead the precise statements at issue that they claim were defamatory."

Wells Fargo & Co. asked to be dismissed as a party because it was "improperly name[d]" in the suit, as there are no "factual allegations supporting a viable claim against it."

"Plaintiffs do not sufficiently allege any facts suggesting that Wells Fargo & Co. was directly involved in the COVID forbearance decisions," the bank said.

Theodore O. Bartholow III of Kellett & Bartholow PLLC, counsel for the customers, told Law360,  "Without commenting specifically on the merits of Wells Fargo's motion, we note that Wells Fargo has already admitted publicly that it put its customers' mortgages into forbearance without their consent in the middle of a pandemic."

Wells Fargo is facing several suits stemming from its actions during the pandemic, including one from agents who helped businesses prepare applications for forgivable loans under the federal Paycheck Protection Program. The agents claim they're due fees for their services, a claim the bank alleges is unfounded.

The bank is also facing several suits from small businesses that claim Wells Fargo favored larger businesses when doling out the loans, instead of awarding them on a first-come, first-served basis.

Counsel for Wells Fargo didn't immediately respond to requests for comment Thursday.

The customers are represented by Malissa Lambert Giles of Giles & Lambert PC, Karen L. Kellett, Theodore O. Bartholow III and O. Max Gardner of Kellett & Bartholow PLLC.

Wells Fargo is represented by Michael E. Hastings, J. Benjamin Rottenborn and Justin E. Simmons of Woods Rogers PLC, William C. Mayberry, Amy P. Williams, Andrew D. Atkins and John C. Lynch of Troutman Pepper.

The case is Gerald Forsburg v. Wells Fargo & Co. et al., case number 5:20-cv-00046, in the U.S. District Court for the Western District of Virginia.

--Additional reporting by Jon Hill. Editing by Michael Watanabe.

Correction: An earlier version of this story incorrectly identified counsel. The error has been corrected.

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