Home Equity Lending News

Statements on Reaffirmed HELOC at Issue in PNC Settlement


A settlement has been reached between PNC Bank, N.A., and a Michigan couple who alleged that the bank failed to send them required loan statements for the home-equity line of credit they reaffirmed during their bankruptcy.

Jeffrey and Barbara Polonowski obtained a HELOC from PNC in 2017, according to court papers. They filed for Chapter 7 bankruptcy in June 2018 and reaffirmed the approximately $141,000 home-equity debt a few months later.

Reaffirming a debt, which is a typical part of the bankruptcy process, means  the borrower agrees to continue to make payments on the debt as previously agreed. Debtors often reaffirm real estate  or automobile debt so they can maintain ownership of the property.

The Polonowskis claim PNC bank stopped sending periodic statements regarding the HELOC in May 2019. When asked about the omission, the bank said the statements weren’t provided because of the bankruptcy proceeding, according to court papers.

When a debtor declares bankruptcy, an automatic stay falls into place. “Creating, perfecting, or enforcing a lien against property” of the bankruptcy estate is expressly forbidden under the bankruptcy laws. The stay stops most collection efforts, including communication with debtors. The automatic stay is an important and powerful protection for debtors. Bankruptcy officials and the courts come down hard on creditors that do not honor the automatic stay.

Monthly payments were made by the homeowners on the HELOC before and after the reaffirmation, according to the court. The couple received their discharge from bankruptcy in November 2018.

The couple sued PNC in federal court in Michigan in February 2020, claiming the lender violated the Truth in Lending Act and the Real Estate Settlement Procedures Act. They alleged the bank has a habit of failing to send periodic loan statements to consumers going through bankruptcy, even in instances where the mortgage debt has been reaffirmed — harming consumers by preventing them from receiving notice of interest rate changes, minimum payment amounts, remaining balance, and other critical information, according to the plaintiffs.


PNC asked the court to dismiss the lawsuit, arguing that the TILA claim should be thrown out because it acted in good faith. The bank said it was not obligated to send periodic statements because the plaintiffs were in bankruptcy and argued that the automatic stay provided in the bankruptcy code prohibited the sending of any loan statements even after the plaintiffs’ loan was reaffirmed and the plaintiffs’ debts were discharged.

Even if a discharge order were issued, the lender asserted, the bankruptcy case was open and the court had not issued an order lifting the stay.

The plaintiffs argued that sending the information required by TILA is not a prohibited act. They said providing the information would not be an act to obtain possession of the property of the bankruptcy estate and that sending information required by TILA would not be an act to enforce a lien against the property of the estate.

Additionally, they argued that interpreting Regulation X, which implements RESPA, to mean that mortgage loan does not include open-ended lines of credit such as a home equity plan is incorrect and an impermissible narrowing of the statute.

PNC’s motion to dismiss was referred by the presiding judge to the magistrate judge for a report and recommendation. The magistrate judge sided with PNC and recommended the court grant the motion to dismiss. The plaintiffs objected and requested that the judge conduct a fresh review of the motion.

The judge rejected the magistrate’s recommendation, deciding that the case could move forward. The court emphasized that once a discharge order has been entered in a bankruptcy case, the bankruptcy code does not prohibit sending statements regarding a reaffirmed debt.

Noting that the periodic disclosures required by TILA “would not likely violate federal law,” the court explained that “informational account statements and notifications” do not violate the automatic stay as long as the documents are not coercive.

The judge also ruled that RESPA could not be narrowed by Regulation X, its implementing regulation, and as a result, the plaintiffs’ secondary claim that PNC unlawfully failed to correct servicing errors that were brought to its attention was viable and could not be dismissed.

In the latest case developments, the parties filed documents with the court on Jan. 31 indicating that the matter has been settled. Settlement details were not included in the notice.

The plaintiff’s attorney did not respond to a request for comment and settlement details.

PNC declined to comment on the case.

PNC, which was recently ranked by HELN as the nation’s top home equity lender, is still  fighting a separate home-equity lawsuit brought by a Maryland man who says the lender should not have taken money from his checking account to make payments on an overdue HELOC tied to a credit card.

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The latest case is Polonowski v. PNC Bank, N.A., U.S. District Court for the Western District of Michigan, Southern Division, Case No. 1:20-cv-151.


Lisa Burden is a freelance journalist who writes for HELN about legal issues and litigation tied to second mortgages. She has more than two decades’ experience covering the mortgage industry. Lisa achieved a B.A., in communications from the University of Dayton, and a J.D. from the University of Maryland Francis King Carey School of Law.



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