Category: Legal & regulatory

Chase on Gov’s sh*t list

It seems that JP Morgan Chase has gone from government darling to heavy regulatory scrutiny since the London Whale incident, as this article from the Wall Street Journal shows (J.P Morgan Under Regulatory Fire, WSJ 5/3/13).

Burned customers have known for years that Chase isn’t the prim and proper corporate citizen it claims to be (just read this blog for many many infractions against customers).  Among the concerns:

Regulators also presented Mr. Dimon and the board with an annual report card that was critical of compliance, audit and risk …

That covers pretty much everything an investment bank does.  Some of the specifics they are accused of are:

The Federal Energy Regulatory Commission has served J.P. Morgan with a Wells notice accusing the bank of misrepresenting prices of electricity contracts with California and Michigan that resulted in over payments. It also alleges commodities chief Blythe Masters and three other traders had false representations under oath about trading schemes and the strategies behind the schemes.

Regulators are also examining whether customers were charged for services but didn’t receive the actual benefit and whether the bank provided adequate warnings about the fraud of Bernard Madoff, said people familiar with the bank’s discussions with regulators. J.P. Morgan and the OCC declined to comment.

Some good news for Chase customers as regulators appear poised to increase scrutiny of Chase’s consumer banking:

Regulators are making it harder for J.P. Morgan to enter new markets or introduce new products, and they are preparing to hit the bank with more enforcement actions highlighting past missteps in the bank’s consumer operations.

It seems that Chase has irked regulators by blowing them off in the past.

Regulators emphasized their lack of trust in management and their view that past guidance had not been heeded.


Finally, Chase may have to compensate the people they screwed

From the Wall Street Journal.

U.S. Sets Rules for Foreclosure Compensation

WASHINGTON—Banks could be forced to pay as much as $125,000 per customer to compensate borrowers who were subject to foreclosure-processing errors.

More than a year after finding widespread abuses in the industry, banking regulators unveiled a plan Thursday to compensate borrowers for a wide variety of errors, including starting foreclosure for a borrower who wasn’t in default, denying loan assistance in error, making a mistake on a loan modification and wrongfully foreclosing on a member of the military.


A foreclosed home on Pine Island in Lee County, Fla., in November 2010.

Banks have set aside vast amounts of money for foreclosure-related liabilities, said banking analyst Nancy Bush at SNL Financial. “This would just be an additional drop in the bucket,” she said.

Many borrowers with foreclosure errors may not see any money. Only about 194,000 of 4.4 million borrowers sent letters last year have requested a review of their cases to date. Separately, independent consultants are doing reviews of about 145,000 consumers’ files.

The compensation plan is separate from a $25 billion foreclosure-abuse settlement that federal and state officials announced earlier this year. That settlement covered the nation’s five largest mortgage-servicing firms: Bank of America Corp., BAC +1.53% Wells Fargo WFC +1.45% & Co., J.P. Morgan Chase JPM +1.35% & Co., Citigroup Inc. C +0.57% and Ally Financial Inc..

The Financial Services Roundtable’s Housing Policy Council, which represents banks subject to the review, called the regulators’ action “an important step toward completion” of the foreclosure review process.

The national servicing settlement includes $1.5 billion in cash payments, or up to $2,000 per borrower, for homeowners who went through foreclosure between September 2008 and December 2011. That was a different approach from bank regulators, who required banks to hire independent consultants who are undertaking a more detailed review of each consumer’s case.

The biggest awards under the rules announced by the Federal Reserve and Office of the Comptroller of the Currency, would be $125,000 per consumer. Those awards would go to consumers who lost their home without defaulting on their mortgage. Banks also must pay that same fine if they violated a federal law preventing foreclosures on the military or foreclosed on a homeowner enrolled in a loan modification plan.

Smaller awards would go to consumers who had other kinds of violations. Consumers whose applications for loan modifications were improperly denied are in line for up to $15,000. Those who were never solicited for loan help as required under federal programs are eligible for up to $1,000.

Borrowers are likely to face a tough burden of proof for the larger awards, said David Dunn, a lawyer who represents banks at law firm Hogan Lovells,

Foreclosure settlement money going to plug State budget gaps

The New York Times reports today that about 10% of the foreclosure settlement money being paid by the banks is being siphoned off to plug some state budget deficits.

Needy States Use Housing Aid Cash to Plug Budgets

Hundreds of millions of dollars meant to provide a little relief to the nation’s struggling homeowners is being diverted to plug state budget gaps.

In a budget proposed this week, California joined more than a dozen states that want to help close gaping shortfalls using money paid by the nation’s biggest banks and earmarked for foreclosure prevention, investigations of financial fraud and blunting the ill effects of the housing crisis. California was awarded more than $400 million from the banks, and Gov. Jerry Brown has proposed using the bulk of that sum to pay the state’s debts.

The money was part of a national settlement valued at $25 billion and negotiated with five big banks over abuses in their mortgage and foreclosure processes.

The settlement, reached in February after a year of talks and intervention by the Obama administration, was the second-largest in history involving the states, trailing the tobacco industry settlement, and represented the first large-scale commitment by banks to provide direct aid to borrowers.

As part of the settlement, the banks agreed to pay the states $2.5 billion, money intended to help homeowners and mitigate the effects of the foreclosure surge. But critics complained that this was the only cash the banks were required to pay — the rest comes in the form of “credits” for reducing mortgage debt and other activities. Even that relatively small amount has proved too great a temptation for lawmakers.

Only 27 states have devoted all their funds from the banks to housing programs, according to a report by Enterprise Community Partners, a national affordable housing group. So far about 15 states have said they will use all or most of the money for other purposes.

In Texas, $125 million went straight to the general fund. Missouri will use its $40 million to soften cuts to higher education. Indiana is spending more than half its allotment to pay energy bills for low-income families, while Virginia will use most of its $67 million to help revenue-starved local governments.

Like California, some other states with outsize problems from the housing bust are spending the money for something other than homeowner relief. Georgia, where home prices are still falling, will use its $99 million to lure companies to the state.

“The governor has decided to use the discretionary money for economic development,” said a spokesman for Nathan Deal, Georgia’s governor, a Republican. “He believes that the best way to prevent foreclosures amongst honest homeowners who have experienced hard times is to create jobs here in our state.”

Andy Schneggenburger, the executive director of the Atlanta Housing Association of Neighborhood-Based Developers, said the decision showed “a real lack of comprehension of the depths of the foreclosure problem.”

The $2.5 billion was intended to be under the control of the state attorneys general, who negotiated the settlement with the five banks — Bank of America, Wells Fargo, JPMorgan Chase, Citigroup and Ally. But there is enough wiggle room in the agreement, as well as in separate terms agreed to by each state, to give legislatures and governors wide latitude. The money can, for example, be counted as a “civil penalty” won by the state, and some leaders have argued that states are entitled to the money because the housing crash decimated tax collections.

Read more …

Simply distasteful.


Obama chooses Chase banker as chief of staff

Story here.

William Daley has been serving as Midwest chairman for JPMorgan Chase and is the brother of the current Chicago mayor and the son of famed Chicago mayor Richard Daley.

How unfortunate.  With a Chase insider this high in the US government, we can only wonder whether a crack down on Chase’s abusive practices (like parallel foreclosure) will ever happen.

Tell the Fed about your loan-mod or foreclosure nightmare

The Federal Reserve (Chase’s federal banking regulator) announced today that it is investigating the current foreclosure mess.

Now would be a very good time to submit your Chase loan modification or foreclosure nightmare story to the Fed, here.

Chase spend more on lobbying than any other TARP bank

In the first six months of 2010, Chase spend about $3 million on lobbying Congress and various federal agencies, more than any of the other 10 top TARP recipient banks.   More on this story here.

Beware of professional credit cards

A Wall Street Journal article this morning reminded me to warn everyone about one of the banks’ newest tricks to sidestep the new rules from the Credit Card Act of 2009:  professional cards.

These cards, also known as small-business or corporate credit cards, are not subject to the limits on interest rate changes, shortened payment cycles, inactivity fees, applying payments to the lowest interest balance first, large over limit fees and changing card agreements without any advanced notice.  Banks have been inundating ordinary consumers with offers for these cards, about 2 1/2 times as many as they used to, offers that often don’t adequately distinguish these as a different class of card that is not subject to the new laws.

Chase is, of course, among the banks using this tactic heavily.  Chase’s Ink card is one of these so called professional cards that is immune to the new laws.  Being late on your new Ink card by only one day would allow Chase to raise the rate to 29.99%.   Chase’s website for the Ink card touts benefits mostly reminiscent of consumer grade cards, such as rewards and cash back, offering little distinction as to why these cards are better for small businesses, or anyone, than normal credit cards that are subject to the new laws.  Perhaps the Chase Ink card should be called the Red Ink card, as it will cost you more.

Don’t be fooled, you don’t need one of these professional cards.

New overdraft rules take effect today for existing accounts

Last month, banks had to stop automatically activating debit card overdraft protection for new accounts, a practice which they have been doing for years.

Today, August 15th, banks must stop providing debit card overdraft protection for existing accounts unless customers explicitly opt-in to this service.

But this doesn’t apply to every kind of transaction.  The following types of transaction can be used to take money out of your checking account:

• Writing a check.

• Authorizing an electronic transaction using your account number, or the bank’s online bill payment service.

• Setting up repeat payments with your debit account number for something like a cell phone bill or a gym membership.

• Withdrawing money from an ATM.

• Using a debit card at places like stores, restaurants and gas stations.

Only the last two, ATM withdrawls and debit card purchases are covered by the new overdraft protection rules.  If you do not opt in to overdrafts (AND YOU SHOULD NOT), then ATM and debit card purchases may be rejected and no fee will be charged.

But, importantly, the new law doesn’t affect checks or electronic transactions; fees can still be charged on those if the account has insufficient funds.

Very importantly, this means payment services like PayPal.  You can still rack up an overdraft charge if you try and pay for something with PayPal and you have insufficient funds.  Unfortunately, most people would expect that this would work just like using a debit card, but it will not.  Banks can still charge you an overdraft fee for this, so be careful.

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