U.S. Court of Appeals for the 4^th Circuit Court

Banking

HELOC

BOTTOM LINE: Where a couple alleged their bank misled them into believing their application to modify their home equity line of credit was granted, when it was not, but each of their claims was fatally flawed, their suit was dismissed.

CASE: Wesker v. Bank of America N.A., Case No. 22-2086 (filed Dec. 17, 2024) (Judges DIAZ, Rushing, Keenan).

FACTS: Mark and Natasha Wesker sued Bank of America N.A., alleging that the bank (1) wrongfully denied their application for a modification of their home equity line of credit, (2) misled them into believing that their payments were paused pending a decision on their application and (3) misled them into believing that the bank had granted the modification when it had charged off the debt and reported it as delinquent. The district court granted the bank’s motion to dismiss.

LAW: Under Maryland law, the torts of professional negligence and negligent misrepresentation require a plaintiff to show that the defendant owed her a duty of care.

Generally, Maryland doesn’t recognize a duty of care owed by a bank to a customer.

But the Supreme Court of Maryland carved out an exception to this general rule in Jacques v. First National Bank of Maryland, 515 A.2d 756 (Md. 1986). Jacques holds that such a duty exists where a contractual obligation is accompanied by a set of special circumstances involving an especially vulnerable party. Maryland courts have recognized those special circumstances where a bank took on “truly extra, out of the ordinary services” beyond the normal servicing of a loan or received a greater economic benefit beyond the normal proceeds of a loan.

Here, the Weskers contend that they are in contractual privity with the bank because their application for a loan modification arose out of the agreement that created the line of credit. In the Weskers’ view, because they requested a modification to a preexisting agreement, the court may impute the privity arising from the line of credit to the application for a modification.

This court disagrees for the simple reason that the deed of trust establishing the line of credit doesn’t impose any duties on the bank related to modification. The Weskers can’t unilaterally impose obligations on the bank that aren’t in the contract. And the Weskers didn’t pay any consideration to the bank to consider their loan modification application. Therefore, there’s no privity with respect to the modification. To hold otherwise would impose tort liability for every request to modify a loan, which would render hollow Maryland courts’ repeated admonition not to “impose any duties on the bank not found in the loan agreement.”

The court also discerns no special circumstances. Urging otherwise, the Weskers note they were bank customers for 30 years, they had “special privileges,” the bank had originally held the primary mortgage on their property in addition to the line of credit, the bank was aware of their financial distress and the Weskers had a history of timely payments. But this list describes no more than a typical bank-customer relationship.

The Weskers next allege that the bank represented that (1) their payments would be suspended while it processed the loan modification application, (2) the bank would approve their application and (3) the bank in fact approved their application. But because the Weskers fail to allege any clear and definite promises made by the bank on any of their theories, the claim fails.

The Weskers also allege the bank violated the Fair Credit Reporting Act, or FCRA, because it reported the Weskers’ delinquency and the charge off to consumer reporting agencies when it should have approved their application in the first instance. The Weskers’ claims doesn’t challenge the “completeness or accuracy” of bank’s reporting; they collaterally attack the decision not to grant them the loan modification. But the purpose of the FCRA is to ensure fair and accurate credit reporting, not to govern loan modification applications.

Finally, because a claim under the Maryland Consumer Protection Act “sounds in fraud,” a plaintiff must satisfy the higher pleading standards of Federal Rule of Civil Procedure 9(b). The court looks for “the time, place, and contents of the false representations, as well as the identity of the person making the representation and what he obtained thereby.” None of the statements the Weskers’ allege the bank made meet this standard.

Affirmed.