Bank of America's 'PayPlan' Was Deceptive, Homeowners Charge

Automatic payment plan was supposed to save customers money

A federal class action claims Bank of America told customers its "PayPlan" of automatic weekly or fortnightly mortgage payments would save them money on interest, then "systematically and persistently" took the payments late and charged them even more interest.

In the suit, filed in Galveston, Long Ba Nguyen and Lan n Huynh say that BofA's “deceptive, unfair and conscionable” caused them to pay more interest over a longer period of time than they had agreed to.

Bank of America promoted PayPlan by promising customers that if they allowed the bank to withdraw the monthly mortgage payment in either twice-monthly or weekly installments, the customer would pay off their mortgage sooner, resulting in less interest expense over the life of the loan.

The customers and the bank agreed that the payments would be withdrawn on the same day of the month, typically the first and fifteenth.

But the suit charges that Bank of America manipulated the dates of the actual withdrawl and “systematically and persistently withdrew the customer's payment one to five days (or even more) later than agreed.”

As a result, more interest accrued on the unpaid balance of the loan. Further, when a payment was applied later than agreed, more of the payment went towards interest than toward principal.

Bank made more money

“Despite its promotion of the PayPlan to customers as a tool to save money, Bank of America actually used this tool to take more money from its customers,” the suit charges.

The suit seeks damages and restitution for all Bank of America and Countrywide mortgage customers who were enrolled in PayPlan.

The plaintiffs – who are husband and wife – refinanced their home in 2001, taking out a 15-year loan at a fixed interest rate of 7.25%. They signed up for PayPlan and a borrower's protection plan and were promised a 0.5% interest rate reduction for doing so.

But the plaintiffs later discovered that they were not given the 0.5% reduction. The bank modified the loan to reflect the changed from 7.25% to 6.75% and changed the bi-monthly payment from $643.73 to $430.47.

But on August 13, 2009, Bank of America unilaterally canceled the PayPlan and began imposing a fee for the automatic payment service. The bank also changed the payment dates.

Investigating the matter further, the plaintiffs found that not only had the bank changed the payment plan but had also extended the agreed-up loan maturity date without notifying the plaintiffs or seeking their consent, and without any Truth-In-Lending disclosures.

It was also at this time that the bank began withdrawing payments later than agreed, thereby subjecting the plaintiffs to higher interest rates than they would have paid under the original PayPlan agreement.

The suit charges the bank's actions amount to breach of contract, violation of the Truth-In-Lending Act, negligent misrepresentation and unjust enrichment.

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