Mortgage lender sanctioned for violating discharge injunction by repeated calls to discuss alternatives to foreclosure after being told to stop and after debtors locked out of home

An Oregon bankruptcy court slapped Wells Fargo Bank with counsel fees and $4000.00 in damages based on its repeated calls to the borrowers to discuss “alternatives to foreclosure”. (In re Culpepper, 451 B.R. 650 (2012)). The facts of this case are important to understand this result.

The homeowners filed a bankruptcy and initially stated they wanted to surrender their home. Despite this they made three applications for a loan modificatoin, none of which were put into effect. At some point in time they were locked out of the house. Shortly afterwards, they began getting a series of telephone calls. sometimes twice a day to discuss “alternatives to foreclosure”. The savvy homeowner, Ms. Culpepper, recorded these calls (Note: many states make this illegal unless the caller is informed the call is being recorded). The callers were knowledgeable and professional. However, Ms. Culpepper was clearly distressed and repeatedly told them to stop. Each time she was told the calls would stop only if she sent a “cease and desist” letter to a fax number. A total of about 100 such calls continued, even after Ms. Culpepper’s attorney sent a letter to Wells Fargo demanding the calls stop. Fed up, the Culpeppers reopened their case and filea a motion to hold Wells Fargo in contempt of the discharge order.

The court granted that relief, finding that the Culpeppers had met their burden of producing “clear and convincing” evidence that Wells Fargo knowingly persisted after knowledge of the bankruptcy discharge. In awarding damages, the Court had some cogent remarks:

“I find that Wells Fargo knew that the discharge injunction applied with respect to Ms. Culpepper, and I find that Wells Fargo intended to continue to route calls to Ms. Culpepper in an effort to reinstate all of some of a discharged debt, i.e., the Loan, through a loan modification, after Ms. Culpepper had clearly advised knowledgeable, thinking Wells Fargo employees that she was not interested in pursuing a modification of the Loan with Wells Fargo and wanted the calls to stop. Accordingly, I conclude that Ms. Culpepper has established by clear and convincing evidence that Wells Fargo violated the discharge injunction under § 524(a)(2).

 “The question then moves to an appropriate measure of damages. As I indicated in my tentative conclusions communicated at the Hearing, I do not find this case appropriate for the imposition of punitive damages. Ms. Culpepper opened the door to communications with Wells Fargo postpetition and postdischarge through her pursuit of multiple applications to modify the Loan. The specific communications from Wells Fargo representatives consistently and overtly disclaimed any attempt to collect a discharged debt from Ms. Culpepper. If the communications had not persisted in the face of repeated, anguished communications from Ms. Culpepper requesting that the calls stop, the decision could have been different.
 However, the calls did not stop, and there is a fundamental problem with a program of calls where intelligent, knowledgeable Wells Fargo employees cannot take the responsibility to cause such calls to stop in the face of clear communications from a former customer that she has no interest in further pursuing a loan modification and wants such calls to cease. An award of actual damages is appropriate”
Some important lessons apply here. First, borrowers do not have to be subjected to harassment, but they have to develop evidence.  Second, recording the calls, after advising that a recording is taking place, is an excellent gambit. Indeed, such tactics alone may cause the calls to stop. Third, some effort to put into writing a demand to “cease and desist” is important. Fourth, proving damages will require showing how the calls and efforts caused emotional distress. In this case, the Culpepper’s psychologist testified.
At the end of the day, no one should be subjected to this kind of pressure, but if more people call the violators to account, the violations may stop. Assistance of experienced qualified counsel is essential to protect your rights.

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