Shortly after the end of the Great Recession, American Web Loan, which started as a payday loan company, grew like a weed. This sudden, uncontrolled growth set the stage for the AWL settlement. The company was organized under the laws of the Otoe-Missouria, a Sioux branch in Oklahoma. These tribes are usually exempt from federal and state lending laws, like usury laws. But many AWL customers didn’t realize that when they borrowed money.
Such matters seem extremely straightforward. This company stole my money, and I want it back. But these companies aren’t stupid. They know how to use procedural rules, like the difference between U.S. and tribal law, to prevent these lawsuits from seeing the light of day. To help ensure that you at least get some of your money back in these situations, it’s important to work with an attorney who’s experienced in such matters.
Unfair Mortgage Lending Practices
The economy has improved from its coronavirus-induced disruptions. But many families still have trouble paying the bills, and many companies are more than willing to take advantage of this vulnerability. Some examples of unfair lending practices include:
- Improper PMI Termination: Legally, mortgage companies must terminate Purchase Mortgage Insurance once the borrower pays off 22 percent of the original UPB (unpaid principal balance). Many companies “forget” to stop collecting PMI.
- Partial Payments: if a borrower only makes a partial monthly payment, many banks put the funds in escrow, instead of crediting the payment, returning it to the consumer, or holding it in an unapplied funds account, as the law requires.
- Hidden, Unauthorized Charges: We’re used to paying fees we didn’t expressly agree to pay, like delivery fees and surcharges. Banks play by different rules. Such fees are usually illegal unless the borrower expressly agrees to pay them.
Perhaps the most serious unfair mortgage lending practice, predatory lending, happens before borrowers sign on the dotted line. Many of these cases are tragic.
A mortgage broker, who’s often basically a hustler, convinces a buyer to purchase a house s/he can barely afford and sign forms s/he can barely understand. Then, if things go sideways, the bank wants its money, the mortgage broker is long gone, and the buyer pays the price.
The AWL Class Action Lawsuit
This settlement was a little more complex than most, because it was a two-tier settlement. People who borrowed money from AWL in the early days (before January 2012) were eligible for a share of the $86 million settlement if they met certain additional criteria. People who borrowed money between January 2012 and June 2020, when the class closed, were automatically eligible for a cash settlement.
Additionally, as is often the case in class action settlements, AWL (reluctantly) agreed to make things right. It canceled loans it still owned or had transferred to Northwood, a debt collection agency. AWL also asked a credit reporting agency to delete negative information.
Unfortunately, not every affected borrower got the same happy ending. For example, if AWL sold the loan to another servicing company, the borrower had to repay it with the same terms. However, AWL did promise to give these borrowers “legal assistance,” whatever that means.