Question: When is a contract not worth the paper its printed on?
Answer: When it contains weasel words so broad in scope that one party is free to change whatever it wants, whenever it wants.
Janet Bandur and her husband, Darrell, discovered this after Wells Fargo contacted them recently to say that their home equity line of credit was being closed because it is no longer compatible with todays systems.
The Bandurs were told they had one year to pay off the roughly $87,000 they owed on the account.
I dont understand why they did this to us, Janet Bandur, 66, told me. Weve had this line of credit for 24 years. And suddenly theres a problem?
The Los Angeles-area couple pulled out their contract to see whether Wells Fargo could shut down their account willy-nilly. At first glance, it seemed not.
The contract said that if the account was closed, the Bandurs must pay any outstanding amount within seven years, not the one year Wells was insisting on.
Moreover, the contract specified that if the Bandurs chose to make minimum payments over that seven-year period, payments would be calculated on the basis of a 30-year amortization schedule. All remaining funds would have to be paid in a lump sum when the seven years were up.
Bandur called the bank to ask why it wasnt honoring the terms of the contract. She said the initial response was that Wells interpreted the contract differently.
A bank rep explained that the account wouldnt be considered officially closed until the balance was paid off, Bandur said, so the seven-year grace period wasnt applicable.
Points for chutzpah.
Bandur pressed her point. She said Wells own letter referred to the account being discontinued. That sounds pretty near to being closed.
Fine, the bank replied. In that case and Im paraphrasing now Wells reserved the right to do whatever it wants. So there.
Does the contract allow that? Apparently so. Buried deep in the document is the following passage:
The bank may change any term or condition of this agreement with respect to both current and future balances on my account, including, without limitation, the index, the spread, and the provisions relating to the determination, calculation and reassessment of finance charge, membership fee, late charge and any other charges, fees or costs.
I shared this provision with some lawyers. They said that those two words without limitation appear to give Wells the right to change any term of the contract in any way at any time.
Wells own lawyers presumably could argue that the onus is on borrowers to read and understand any contracts they sign. But its hard not to feel that the bank was pulling a fast one on customers.
Why make people sign contracts that contain numerous pages of conditions and fine print when the upshot is that Wells can dictate new terms whenever it pleases?
The Bandurs filed a complaint with the Office of the Comptroller of the Currency, the federal agency that oversees national banks.
In response, Wells sent the couple a new letter saying they could indeed have seven years to pay off their account, but the payments would be amortized over the seven years, meaning that each month theyd owe at least $1,000.
At least theres a happy ending. Langan told me that Wells will back off its position and will honor the terms of the contract, if thats what the Bandurs want. She said the bank believes it can offer them a better deal, but well give them what theyre asking for.
I passed that along to Bandur, who said theyll stick with the original deal. We want to pay off the loan, but we want to pay it off at our own speed, she said.
Just as their contract promised.
DAVID LAZARUS: Consumer columnist and contributor to American Public Medias Marketplace radio program. email@example.com.