Bank of America Impound Account Class Action Settlement Gets Final OK

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On Friday, a California federal judge gave final approval to a class action settlement that will resolve allegations that a Bank of America Corp. unit opened impound accounts even when homeowners were paying their bills on time, subjecting them to penalty fees and adverse credit reports.

The class action lawsuit was initially filed in December 2011 and alleged that Bank of America unit BAC Home Loans Servicing LP improperly opened impound accounts and charged homeowners penalty fees due to the impound accounts, sending the homeowners into default which subjected them to further penalty fees and reports to credit agencies.

According to the class action lawsuit, Bank of America placed homeowners into the impound accounts partly to determine whether they qualified for mortgage refinancing under the Home Affordable Modification Program (HAMP), a federal program designed to prevent foreclosure. The plaintiffs alleged the bank breached its contract with borrowers by opening impound accounts even when they were meeting their financial obligations. Further, they argued that Bank of America violated the law by not correcting their error and by harming their credit scores by telling credit agencies that the homeowners had defaulted on loan payments.

Bank of America has since discontinued the practices at issue in the class action lawsuit. The parties reached the class action settlement in December 2013.

U.S. District Judge Dana M. Sabraw approved the class action settlement following the final approval hearing on Friday afternoon. She also certified a class of California property owners who had residential mortgage loans serviced by Bank of America and for whom the bank created an impound account until May 31, 2011 as a result of its evaluation of eligibility for loan modification pursuant to HAMP.

Bank of America has denied any wrongdoing but agreed to settle the class action lawsuit to avoid the expense and uncertainty of ongoing litigation. The class action settlement provides injunctive relief and provides fixes to individual accounts. However, it does not release Bank of America from monetary claims related to its impound account policies. Class Members maintain their right to retain legal counsel to pursue individual claims for monetary relief.

The plaintiffs are represented by Timothy G. Blood and Thomas J. O’Reardon II of Blood Hurst O’Reardon LLP and Schuyler V.V. Hoffman V of Hoffman & Forde.

The Bank of America Impound Account Class Action Lawsuit is Dolfo, et al. v. Bank of America NA, et al., Case No. 3:11-cv-02828, in the U.S. District Court for the Southern District of California.