Category: Legal & regulatory

Chase faces class action against agressive overdraft opt-in campaign

This was bound to happen given the highly aggressive deceptive and fear-based tactics Chase is using to get people to sign up for their overdraft protection.

SAN FRANCISCO (CN) – JPMorgan Chase Bank forces customers to pay “absurdly high” overdraft fees on debit cards in violation of a federal regulation that protects people from such fees, according to a class action in Federal Court. Congress passed Regulation E in November 2009; it requires bank customers to “opt in” before banks can charge them overdraft fees on debit transactions.
Chase, which claims that Regulation E will cost it $500 million a year, “is doing everything it possibly can to scare and mislead customers into opting-in to an abusive and unfair overdraft program, which causes significant harm to its most vulnerable customers, while resulting in massive profits for the bank,” according to the complaint.
The class claims Chase is aggressively pushing its customers to opt in, bombarding them with misleading ads that “create the impression that the customers’ debit card will simply stop working or experience significant problems in everyday usage if they do not opt-in to being charged overdraft fees.”
To bully customers into opting in to its overdraft program, the class says, Chase has altered its available-funds policy so that direct deposit funds are not available on the day the money is received – but only for customers who have not opted in.
“Chase is fully aware that many of its customers who live paycheck to paycheck need to have access to their funds on the day that they make deposits, such as direct pay checks from employers,” the class claims.
“However, Chase has changed its practice of making these funds available in order to create hardships for these customers … in order to coerce its customers into opting-in to the abusive overdraft program.”
Lead plaintiffs Victor Espinosa and Rhonda Closson both claim that Chase withheld money from their paychecks, and say they were not given notice that their money would no longer be available on the day it was deposited.
The class seeks restitution and punitive damages for breach of contract, conversion, fraud and unfair business practices, and an order prohibiting Chase from running deceptive ads about its overdraft program.
They are represented by David Wright with McCune Wright of Redlands.

Dimon missing from financial overhaul regulation signing event

Citigroup’s CEO Vikram Pandit was the only major bank CEO present at yesterday’s financial overhaul regulation signing event.  Notably missing was Obama’s favorite banker, Jamie Dimon of JP Morgan Chase.

Could loan mods suddently get much easier?

Treasury Secretary Timothy Geithner was on The News Hour the other night and was asked about the dismal results for successful loan modifications.  Apparently, there are $73 Billion in available funds and only a few hundred million have been spent on HAMP loan modifications to date.  I wasn’t aware it was that bad.  Pretty pathetic.

Well, things might be about to change for the better according to this article:

July 8, 2010 – Borrowers who have not been having any luck trying to get a loan modification with their mortgage holder will be happy to know about the recently initiated loan modification process.

Due to the low percentage of permanent modifications that are being offered the Treasury Department is now offering struggling homeowners a streamlined procedure with less paperwork and a short turnaround time.

Until recently the success rate of the Home Affordable Modification Program (HAMP) was rather dismal. Over $73 billion dollars that was accessible to fund HAMP was not being used to help homeowners who were facing foreclosure.

However, as of the beginning of this quarter new timelines and guidelines kicked in. It’s hoped that these changes will, at the least, let homeowners know whether they qualify for HAMP is a more reasonable amount of time.

It is now possible to get an answer to a loan modification application within thirty days.

If approved, it will be possible for borrowers who find it difficult to make their existing monthly payments, or those who will probably be delinquent in the foreseeable future, to reduce their net payable monthly payments or increase their mortgage tenure and get a more affordable mortgage loan repayment plan.

A search of the Internet will help those in need discover what the home affordable modification guidelines are – the ones that they need to know in order to qualify for HAMP.

So, it is now possible to get an answer within 30 days.  Will those answers mostly be no?  Will Chase all-of-a-sudden stop losing paperwork?

Lobbying by banks takes off

Wonder why the financial reform bill is stalled in Congress and is now missing the new bank tax?  Look no further than the lobbying efforts of banks like JP Morgan Chase, whose spending on lobbying increased in first quarter of 2010 to $1.5 million, a 15% increase over the $1.3 million they spend in the same period last year.  I can only guess that it went up even more in the 2nd quarter, but we’ll have to wait a while to find that out.

New CA law provides tax relief for forgiven debt

As short sales, loan forgiveness, and foreclosures proliferate, many former homeowners are finding themselves with a huge tax bill. Any amount of your loan the is forgiven is subject to taxes as if it were income.

In California, there is now some relief.  Gov. Schwarzenegger signed SB 401 into law last Monday which modifies California law to match the tax treatment of forgiven debt with that of the federal government, recently changed through the federal Mortgage Forgiveness Debt Relief Act, which forgives this “phantom” income up to certain amounts.  The new California law retroactively applies to such income back to the beginning of 2009.

The limits are complicated and not easily described.  For more detail, read the text of SB 401 (California) or the text of the  Mortgage Forgiveness Debt Relief Act (IRS).

Fannie to disallow new loans to strategic defaulters

The bad-news:  Fannie Mae reported today that they are establishing a new policy banning anyone who strategically defaults on their loan from obtaining a new Fannie Mae loan for seven years.  Fannie Mae backs a large portion of residential mortgages in the US.

The really bad news:  What exactly is a strategic default?  Whether someone walking away from a mortgage/home is a strategic default  depends on whether or not they are able to afford the loan.  So who determines this?  Now here is the really bad news:  Your loan servicing company determines this.  This means that Chase now has the power to threaten you with classifying your non-payment of your mortgage as a strategic default rather than due to hardship.

The good news:  This Fannie Mae policy doesn’t really matter for a couple of reasons.  First, if you default on a mortgage, it is not-likely that you would be able to obtain a new mortgage within seven years (when it goes off of your credit report) anyways.  Second, at the rate they are going, Fannie Mae (and Freddie Mac) could be gone well before seven years comes around.

Don’t worry, be happy.  With respect to your mortgage, make the decision which makes the most financial sense to you. 

Chase’s regulator visits anti-chase site

I’ve always found it interesting that Chase has never tried to contact us to see what it would take for us to stop publishing this site.  It is clear from our server logs that Chase personnel do regularly visit our site.  Whether this is just random Chase personnel bored with not doing their jobs very well or upper level management types keeping tabs on the vocal dissenters, is a big mystery.

Well, in a twist to this game, apparently someone from the Comptroller of the Currency, who regulates Chase bank visited  Just for the record, I haven’t checked our logs to see if we have had similar visits.  We can only hope they are on a fact-finding mission and plan to actually start regulating banks like JP Morgan Chase.

Chase becomes more transparent by becoming less transparent

Sometimes you just have to stand back from all the negative news about Chase and laugh.  It is really quite hilarious what they do at times.

Like this latest letter Chase’s Paymentech subsidiary sent to customers, under the guise of being even more transparent with its customers about its merchant processing fees.  Even one recipient of the letter, a lead plaintiff in the lawsuit against Visa and MasterCard, can’t understand what they are trying to say.

That BankSimple concept we wrote about a few days ago is looking better and better.

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