JPMorgan Chase & Co. took procedural shortcuts and used faulty account records for at least two years in suing tens of thousands of delinquent credit card borrowers, current and former employees say, American Banker reported today. The process flaws sparked a regulatory probe by the Office of the Comptroller of the Currency and forced the bank to stop suing delinquent borrowers altogether last year. The bank's errors could call into question the legitimacy of billions of dollars in outstanding claims against debtors and of legal judgments Chase has already won, current and former Chase employees say. Company documents, court filings, and interviews with seven current and former employees reveal that Chase's credit card litigation operation was allegedly plagued by unreliable external attorneys, management's disregard for accuracy, and patchy technology. The employees' stories corroborate allegations made by Linda Almonte, a former mid-level business process executive in Chase's San Antonio-based Credit Card Litigation Support Group. Dismissed in November 2009 after six months on the job, Almonte filed whistleblower complaints and a wrongful termination suit claiming that she was fired for objecting to the sale of credit card debts with erroneous balances. Read more.
STUDY: PENSION BENEFIT COSTS CUT BY RECORD 43 STATES
The National Conference of State Legislatures reported that pension benefits for U.S. public workers were reduced by a record 43 states over three years to cut costs following the longest recession since the 1930s, Bloomberg News reported today. Two recessions since 1999 have made it difficult for states to maintain the funding of 126 pensions, reducing estimated assets held by the plans to 77 percent of projected liabilities in 2010 from 103 percent, the report said, citing data from the Boston College Center for Retirement Research in Newton, Massachusetts. The funded ratio of the plans may be as low as 53 percent, according to the report. States raised employee contribution rates, forced workers to stay on the job longer before retiring and raised the age for full benefits. Only a few, such as Utah, Alaska and Indiana, began offering 401(k)-style plans. At least 10 cut post-employment benefits. Read more.
ANALYSIS: FIVE MORTGAGE RELIEF PROGRAMS THAT FELL SHORT
Lenders will take new steps in the next few months to help one million struggling homeowners pay their mortgages, but experts say that if recent history is any guide, relief will not make it to that many doorsteps, according to a Wall Street Journal analysis yesterday. Over the past few years, the federal government's major mortgage relief programs helped just a fraction of the homeowners they initially set out to assist. The Home Affordable Modification Program and the Home Affordable Refinance Program, both introduced in 2009, have so far assisted just 20 percent of the homeowners that government officials had projected. Other programs were shuttered altogether after not gathering enough borrower or lender participation. In fact, the U.S. government's five major programs, which were projected to assist 13.4 million homeowners, only reached 1.9 million. This week, the government filed the settlements it reached in its $25 billion agreement with five banks over alleged foreclosure abuses. The five banks involved -- Ally Financial, Bank of America, Citigroup, J.P. Morgan Chase and Wells Fargo -- will spend much of that money providing aid to homeowners by reducing mortgage principal, refinancing more mortgages and making payments to those they foreclosed on. Though the settlement is legally binding, some housing experts predict the efforts may not have the impact government officials expect. Borrowers who owe more on their homes than they are worth stand to receive a principal reduction of about $20,000 on average -- although those same borrowers are underwater by $51,000 on average, according to CoreLogic. Also, those homeowners who were foreclosed on between 2008 and 2011 stand to receive a meager $1,500 to $2,000. Read more.
FORMER FDIC CHAIR WARNS THAT DODD-FRANK COULD SHUTTER MANY COMMUNITY BANKS
Former FDIC Chairman Bill Isaac warned that the Dodd-Frank financial reforms could put half of the community banks across the nation out of business, CNBC.com reported yesterday. "The bigger banks can absorb it, the smaller banks can’t," said Isaac, who is now chairman of Fifth Third Bancorp. "I would not be surprised to see half of the community banks in this country go out of business if we don’t give some relief from Dodd-Frank for them." Earlier yesterday, Federal Reserve Chairman Ben Bernanke said most of the provisions in the 2010 law were aimed at the largest financial institutions and not community banks. "We will work to maintain a clear distinction between the community banks and larger institutions in application of the new regulations," Bernanke said. Read more.
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ABI's "Hot Topics in Confirmation" live webcast on April 3 at 11 a.m. ET will discuss applying section 1129(a)(10) to a joint chapter 11 plan for multiple debtors, credit-bidding before the Supreme Court, equitable disallowance of claims and the gifting doctrine after DBSD North America. Those purchasing the live webcast, provided through West LegalEdCenter, will receive complimentary access to the on-demand version for 180 days once it becomes available. Please note that the on-demand and podcast versions may or may not be accredited in your state. Click here to register.
LATEST CASE SUMMARY ON VOLO: BANK OF AMERICA, N.A. V. ALLEN CAPITAL PARTNERS, LLC (IN RE DLH MASTER LAND HOLDING, LLC; 5TH CIR.)
Summarized by Neal Paul Donnelly of the U.S. Bankruptcy Court for the District of Delaware
The Fifth Circuit affirmed the bankruptcy court's denial of Bank of America's motion for permission to file a late claim, holding that the bankruptcy court did not abuse its discretion in finding that Bank of America failed to show that its failure to file a timely claim resulted from "excusable neglect" under Fed. R. Bankr. P. 9006(b)(1). The Fifth Circuit reasoned that Bank of America received multiple notices of the bar date before it passed yet failed to inform its counsel. Bank of America's "mere inadvertence" is not enough to meet the excusable neglect 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: 9TH CIRCUIT BAP HOLDS THAT BANKRUPTCY COURT MAY CONSIDER THE EXISTENCE OF A THIRD-PARTY SOURCE OF RECOVERY WHEN DETERMINING WHETHER UNSECURED CLAIMS ARE "SUBSTANTIALLY SIMILAR”
The Bankruptcy Blog Exchange is a free ABI service that tracks 35 bankruptcy-related blogs. A recent blog post examines a recent by decision the Ninth Circuit BAP that found that a bankruptcy court may consider the existence of a third-party source of recovery when determining whether unsecured claims are "substantially similar."
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