CONSUMER BUREAU TO SUPERVISE DEBT COLLECTORS, CREDIT BUREAUS
The Consumer Financial Protection Bureau proposed a regulation that would let it examine the books of debt collectors and consumer reporting businesses as part of its program to supervise non-bank financial companies, Bloomberg News reported today. "Our proposed rule would mean that those debt collectors and credit reporting agencies that qualify as larger participants are subject to the same supervision process that we apply to the banks," said CFPB director Richard Cordray. The regulation, which must be finalized by July 21, would bring credit bureaus such as Experian Plc, Equifax Inc. and TransUnion Corp. under federal supervision for the first time. The proposal would cover, also for the first time at the federal level, debt collectors such as Asset Acceptance Capital Corp., Portfolio Recovery Associates Inc. and Encore Capital Group Inc. Read more.
HOMEOWNERS GET MORE TIME FOR FORECLOSURE REVIEWS
Federal regulators have announced that they would give borrowers who have faced foreclosure since early 2009 an additional three months to have their cases reviewed for potential wrongdoing, the Washington Post reported today. Borrowers will now have until July 31 to apply for the free review, which stems from a deal last year in which 14 servicers agreed to hire independent consultants to evaluate whether homeowners suffered financial injury during the foreclosure process. Examples of financial injury might include unwarranted or miscalculated fees charged to borrowers, a foreclosure that happened while a borrower was already in bankruptcy protection, or a property that underwent a foreclosure sale even as the borrower was awaiting word on a loan modification from the servicer. If a review finds errors or abuses by the financial firms, the consultants will determine what recompense wronged homeowners deserve. The reviews apply to borrowers whose loans were in the process of foreclosure between Jan. 1, 2009, and Dec. 31, 2010.
REPORT: FORECLOSURE ACTIVITY EDGES HIGHER IN JANUARY
RealtyTrac Inc. reported that banks took back more U.S. homes in January than in the previous month, the latest sign that foreclosures are accelerating after slowing sharply last year while lenders sorted out foreclosure-abuse claims, the Associated Press reported today. Foreclosures rose 8 percent nationally last month from December but were down 15 percent from a year earlier, according to RealtyTrac. The 210,941 U.S. homes that received a default notice were scheduled for auction or were repossessed by a lender in January, RealtyTrac said. That is up 3 percent from December, but a drop of 19 percent from January of last year. The foreclosure rate translates to one in every 624 U.S. households. Read more.
ANALYSIS: MERGER LAWSUITS OFTEN MEAN NO CASH FOR INVESTORS
Of 57 investor class actions settled or otherwise concluded in 2010 and 2011, 40 -- or 70 percent -- made money for plaintiffs' lawyers but not clients, according to a Bloomberg News analysis today. Overall, lawyers won $32.4 million for themselves in the 40 cases that generated no money for clients. The lowest legal fee award was $150,000; the highest was $4 million. The median came to $512,500, according to the data. The 17 mergers and acquisition (M&A) lawsuits that resulted in cash for clients produced $350 million for the shareholders. The largest, a Del Monte Foods Inc. case, gave plaintiffs $89.4 million. Of that amount, attorneys were paid $22.3 million. M&A class actions are the fastest-growing type of securities litigation, according to Cornerstone Research. Among deals of $100 million or more announced in the past two years, 91 percent were challenged in court, the legal research firm said in a report. Read more.
CITIGROUP WHISTLE-BLOWER SAYS BANK'S "BRUTE FORCE" HID BAD LOANS FROM U.S.
Four years after bad mortgages helped trigger a global financial crisis, Sherry Hunt said that her Citigroup Inc. quality-control team was still finding flaws in new loans that included altered tax forms, straw buyers and borrowers who listed fictitious employers, Bloomberg News reported today. Instead of reporting the defects to the Federal Housing Administration, the bank saddled the agency with losses by falsely declaring the loans fit for its federal insurance program, according to a complaint filed yesterday by the U.S. Attorney's Office in Manhattan. Citigroup agreed to pay $158.3 million to settle the claims, and admitted that it certified loans for FHA backing that did not qualify. Hunt, who filed a sealed lawsuit against New York-based Citigroup in August that the government joined, will collect $31 million of that sum -- before taxes and attorney's fees -- as a whistle-blower, she said yesterday. The settlement, which encompassed misconduct spanning 2004 to the present, indicates that Citigroup has lingering problems in its O’Fallon, Missouri-based CitiMortgage unit. Read more.
ABI IN-DEPTH
APPLICATIONS BEING ACCEPTED FOR BANKRUPTCY JUDGE OPENING IN MISSISSIPPI
The U.S. Court of Appeals for the Fifth Circuit seeks applications from all highly qualified candidates for a 14-year appointment as a U.S. Bankruptcy Judge for the Northern District of Mississippi at Aberdeen. Bankruptcy Judge David Houston III will be retiring at the completion of his current 14-year term on December 27, 2012. Those interested in applying for the position should click on the link below or write to Gregory A. Nussel, Circuit Executive, U.S. Court of Appeals, Fifth Circuit, 600 Camp Street, Room 100, New Orleans, La. 70130. The deadline for submitting completed applications is Feb. 29, 2012. Click here for more information.
LATEST CASE SUMMARY ON VOLO: PONCE V. BCA FINANCIAL SERVICES, INC. (11th CIR.)
Summarized by Jeffrey Snyder of Bilzin Sumberg Baena Price & Axelrod LLP
The 11th Circuit handed down a summary judgment on claims under Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq., and affirmed that (a) a letter sent to an invalid address was not "initial communication" but rather later phone call was initial communication that was not followed by required written notice within 5 days, (b) a call to a third party to locate the debtor failed to include required disclosure, and (c) the debt collector's statement based on general knowledge of insurance practices and not specific knowledge of the debtor's circumstances was "false, deceptive, or misleading representation" under the applicable "least sophisticated consumer" standard.
More than 400 appellate opinions are summarized on Volo. Click here regularly to view the latest case summaries on ABI’s Volo website.
NEW ON ABI’S BANKRUPTCY BLOG EXCHANGE: FRIENDLY'S RESTAURANTS SHIFTS FOCUS AFTER EMERGING FROM BANKRUPTCY
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. In October, Friendly's Restaurants filed for bankruptcy protection, closing about 100 of its 500 locations scattered along and slightly inland of the East Coast. Now emerged from bankruptcy court, sources note that the restaurant has shifted its focus toward ice cream products designed for distribution to grocery retailers, and it is seeing positive results.
Be sure to check the site several times each day; any time a contributing blog posts a new story, a link to the story will appear on the top. If you have a blog that deals with bankruptcy, or know of a good blog that should be part of the Bankruptcy Exchange, please contact the ABI Web team.
ABI Quick Poll The requirement that all individual debtors receive financial management training as a prerequisite for discharge should be repealed. Click here to vote on this week's Quick Poll. Click here to view the results of previous Quick Polls.
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