The New York Times recently wrote about announcements from Bank of America and JPMorgan Chase that the banks will be updating consumer credit reports to remove debts discharged in bankruptcy proceedings. The move comes following a series of lawsuits alleging that several creditor banks have not only failed to accurately report information to the credit reporting agencies, but have also been caught selling discharged debts to third party collectors who attempt to collect debts discharged in bankruptcy. An attempt to collect a discharged debt is often a violation of federal law. Under the Fair Debt Collection Practices Act, consumer debts including medical debt, and personal credit card debt cannot be collected following a discharge in bankruptcy. Yet, as the New York Times reports, it is not uncommon for collection letters, phone calls and even lawsuits to resume after the finality of bankruptcy proceedings.
If you believe that you are being subjected to collection efforts on debt that has been discharged in bankruptcy, you may be entitled to monetary relief and injunctive relief including a stop to collection efforts and repair to your credit history if negative information was reported following discharge. Often times, a client’s relationship with their bankruptcy attorney ends at the time of discharge. It is advisable that you seek professional help from an attorney who practices financial consumer rights litigation. Do not assume that an attorney you previously worked with is aware that collections are continuing.
AS REPORTED IN THE NY TIMES MAY 7, 2015
Bank of America and JPMorgan Chase Agree to Erase Debts From Credit Reports After Bankruptcies
Bank of America and JPMorgan Chase to Update Consumer Credit Reports to Remove Debts Discharged in BankruptcyMay 12th, 2015 by Denbeaux & Denbeaux
It has long been my personal opinion based upon experience representing homeowners facing threat of foreclosure that having Ocwen as a loan servicer meant the homeowner had the best possible chance of obtaining a loan modification that made financial sense both for the homeowner and lender.
Recently, the trend is shifting and the new report that Ocwen has failed a compliance test regarding loan modification and loss medication processes is troubling. It is evident that Ocwen’s approach of cost cutting is preventing it from improving compliance and maintaining its stature as a leader of creative problem solving in the servicing industry.
According to Bloomberg Business, Ocwen maintains 70% of its employees in India. One can only imagine this has exacerbated the companies communication and compliance problems. Ocwen CEO Ronald Faris stated that Ocwen will be looking to contract its operations in an effort to improve compliance. This is an acknowledgment that the company grew too big, too fast which has resulted in preventable injuries to many borrowers.”
Ocwen Fails Loan Mod Compliance Test in Mortgage Settlement
Ocwen Financial failed a test to determine whether it had notified borrowers of missing or incomplete documents for loan modifications in a timely manner, according to the national mortgage settlement monitor.
Joseph A. Smith Jr., the settlement monitor, plans to file a report Thursday with the U.S. District Court for the District of Columbia outlining corrective actions taken by Ocwen, which passed eight other tests.
Ocwen reported preliminary first-quarter earnings last week in which it said it does not expect to face any fines or actions from regulators that would have a material impact on its results.
In December, Smith launched an investigation of Ocwen saying he could not rely on the Atlanta servicer’s internal review process.
The retesting of metrics began last year after a whistleblower contacted Smith claiming that Ocwen was selecting its own samples of loan files instead of taking a statistical sample. Smith then created a hotline to allow any concerned employees to contact him.
The results of the current review by the independent accounting firm McGladrey show that Ocwen failed just one metric, on loan mod documentation, that it had previously claimed to have passed. The company passed eight other tests including one that its internal review group claimed to have failed on terminating force placed insurance agreements.
To put Ocwen’s results in perspective, last year, Green Tree Servicing failed eight tests during one testing period, prompting further scrutiny of nonbank servicers’ processes.
Ocwen has replaced an unnamed executive who had previously led the internal review group that was created to comply with terms of the 2012 national mortgage settlement, Smith said. The company also has reorganized its employees, adopted corporate governance principles and enhanced the monitor’s access to information, Smith said.
The settlement allows banks and servicers to correct all violations, and it only subjects them to financial penalties if their mistakes reach a specific “error threshold” after corrective actions have been taken. No bank or servicer has yet paid financial penalties for failing any of the 33 metrics being tested by independent reviewers working for Smith.
Ocwen said it is committed to being fully compliant with all the rules and regulations related to its business.
“We are pleased with the progress we have made so far working with the monitor, and we will continue to make every effort to improve all aspects of our compliance procedures and processes,” the company said in an emailed statement.
The 2012 national mortgage settlement with federal regulators and 49 state attorneys general resulted from servicers’ “robo-signing” foreclosure documents and other lapses. Ocwen became a party to the settlement after purchasing mortgage servicing rights from Residential Capital, the former lending arm of General Motors that later belonged to Ally Financial.
State’s public pension fund has $50 million stake in high-interest lending firm that’s banned in NJ
New Jersey maintains a statute that prohibits payday-lending companies from operating within the state. Despite this prohibition, New Jersey’s public pension fund has invested $50 million in a private equity fund that owns Ace Cash Express Inc., a company that is prohibited from conducting business in New Jersey.
It is unethical for the state to fund its pensions from the profits of an unscrupulous company that is prohibited from conducting business within the state. The Division of Investments should immediately divest from the private fund managed by JLL Partners and instead invest in companies that reflect the social and moral landscape of the state.
By virtue of the investment, the New Jersey State Investment Counsel is part owner of Ace, the second-largest payday lending company in the United States.
Lenders in New Jersey are prohibited from charging an APR in excess of 30 percent. According to Fortune, Ace’s loans typically carry an APR ranging from 65.35 percent to 1,409.36 percent, in addition to an origination fee.
The company operates in 36 states, choosing not to do business in states that impose interest rate caps below 50 percentage points. The high interest rate leads to profits for investors, but a cost for the public and consumers doing business with companies like ACE.
The Consumer Financial Protection Bureau (CFPB) investigated Ace’s lending practices. In July 2014, Ace entered into a consent order acknowledging that it had acted in violation of the Consumer Financial Protection Act of 2010.
According to the settlement, loans issued by Ace have a two-week repayment period and consumers are typically forced into a cycle of refinancing loans to avoid default.
Ace also acknowledged using inappropriate collection techniques including repeated calls to non-debtors demanding payments, calling third-party references and disclosing information about debtors, and encouraging its collectors to make illegal threats if debtors did not pay immediately.
Ace also admitted training its collectors to push borrowers into a debt spiral by convincing borrowers to refinance existing debt and pay new fees instead of paying off existing loans.
It is inappropriate for the state to own an equity share of a company that is prohibited from doing business in New Jersey and has acknowledged violating federal law. New Jersey’s return on investment of approximately 11 percent does not justify profiting from a company that the state views as morally irresponsible.
How N.J. pension money financed the purchase of a ‘predatory’ lender
on May 06, 2015 at 9:30 AM, updated May 06, 2015 at 11:09 AM
TRENTON — Consumer advocates are calling for the state to divest itself from a private equity firm that used $50 million in New Jersey pension fund dollars to acquire a lending company tied to illegal debt collection tactics.
At issue is the state’s stake in a partnership formed by JLL Partners of New York, which used the proceeds to help fund its 2006 acquisition of ACE Cash Express — a Texas-based operator of check cashing stores that used false threats, intimidation, and harassing calls to bully borrowers of so-called “payday” loans, according to the federal Consumer Financial Protection Bureau.
The investment, while indirect, was challenged by Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, who wants the State Investment Council to get its money out of the partnership.
“We don’t want taxpayers dollars going to a predatory company that isn’t even allowed to do business in New Jersey,” she said.
Payday loans are barred in New Jersey under laws governing cashing of checks. A bill pending in the legislaturewould also classify such lending as a violation of the Consumer Fraud Act.
Last July, the CFPB took enforcement action against ACE Cash Express over its debt collection practices, citing its harassment and false threats of lawsuits or criminal prosecution to pressure overdue borrowers into taking out additional loans they could not afford.
Payday loans are often marketed to help people make it between paychecks, but are usually expensive, small-dollar loans that must be repaid in full in a short period of time, according to the CFPB. The agency noted a study it conducted last yearthat found four out of five payday loans were rolled over or renewed within 14 days, leading consumers to ultimately pay more in fees than the amount of money originally borrowed.
ACE agreed to provide $5 million in refunds and pay a $5 million penalty. But in the wake of the enforcement action, Salowe-Kaye questioned why New Jersey would put its pension funds into such a business.
“There’s a reason payday lending is illegal in New Jersey,” she said. “Payday lenders prey on desperate borrowers living paycheck to paycheck, keeping them trapped in a devastating debt cycle payday after payday.”
JLL Partners did not respond to calls or emails.
NO DIRECTION ON PORTFOLIO FUND INVESTMENTS
According to Joseph Perone, a spokesman for the Department of the Treasury, the state initially had not been aware that ACE Cash Express had been penalized, but said JLL Partners had informed the state the lending company had complied with the federal enforcement action.
Perone said the Division of Investment has invested as a limited partner in a number of private equity buyout funds such as JLL Partners.
“In these particular funds, the division neither directs nor approves the companies in which these funds invest,” explained Perone. “Absent a specific law prohibiting investment in a specific company or industry, we would not exclude a particular investment from consideration.”
Consumer rights attorney Adam Deutsch of Denbeaux & Denbeaux in Westwood, however, called the state irresponsible in not vetting the investment more thoroughly.
“I think there is a fundamental problem with the state investing in a company not allowed to do business in New Jersey,” he said. “And the reason they are not allowed to do business in New Jersey is that they charge exorbitant rates on short term loans that are damaging to the community.”
Deutsch said there are “plenty of legitimate businesses allowed to do business in New Jersey that provide similar, if not better, rates of return on their investment.”
Salowe-Kaye, meanwhile, said reforms are needed in the way New Jersey’s Pension Fund is managed. The state has been gradually increasing its stake in non-traditional investments, such as hedge funds and private equity funds. Officials have said the shift has paid off, with better investment returns for a fund that doles out $650 million to $700 million a month in pensions and benefits. But it has also led to increased fees.Last month, trustees of the Public Employees Retirement System vote to conduct a forensic audit after funds’ costs hit a new high last year.
Still, Salowe-Kaye said the JLL Partners investment raised questions about where those pension dollars were going.
“Investments in predatory payday lending companies, when their entire business model is illegal in New Jersey is just one example of irresponsible management of the pension fund,” she said.