The Washington Post published this article today about the Seventh Circuit Court of Appeals’ impending decision on whether homeowners can bring class action lawsuits against lenders to cancel predatory, misleading, or defective loans. The case was brought by a Wisconsin couple against Chevy Chase bank.
Given the rise in the incidence of predatory or manipulative lending practices over the past few years (as brought to light in cases such as People v. Countrywide, filed in Los Angeles County), this case could have a significant impact on Wall Street and the major banks. While the ruling will not change borrowers’ eligibility for relief, it will determine whether borrowers can band together to bring class action lawsuits. As it has up to now proven prohibitively expensive for most individuals to initiate and pursue these cases, the ruling could open the doors to relief for hundreds of thousands of homeowners. Chevy Chase bank alone has estimated that 7,000 of its borrowers have received loans from the bank similar to that of the Wisconsin plaintiffs.