On April 25th, U. S. Bank National Association (“Bank”) was fined the sum of $15 million by the Office of Comptroller of the Currency (OCC) for violations of the federal bankruptcy laws. This fine must be paid into the United States Treasury. The Bank agreed to pay the fine but did not admit to any wrongdoing. The OCC determined that, between 2009 and 2014, the Bank did not properly follow federal bankruptcy laws involving:
- improperly filed Proofs of Claim;
- misapplication of payments resulting in overpayments by customers who were paying through a bankruptcy case;
- improperly filed notices regarding payment changes;
- untimely and/or inaccurate Post-Petition Mortgage Fees, Expenses, and Charges;
- inaccurate Notices of Final Cure;
- exposure of confidential customer information in court filed documents; and
- inconsistent application of the Bank’s fee waiver practices.
You may be asking, “What’s the big deal with what the Bank was doing here?” Well, in many instances, it might be a very big deal for the Bank’s customers who are trying to resolve their financial situations through a bankruptcy case filing. When a person files for bankruptcy and that person owes mortgage debt, it is of the utmost importance that the amount of the mortgage debt be properly ascertained. For sure, the customer/debtor needs for the amount to be correctly ascertained so that he or she will pay what is lawfully owed and no more. The bankruptcy court must have proper documentation before it so that any dispute between the customer/debtor and the mortgage lender can be truthfully and accurately resolved. And the mortgage lender has a right to be paid what it is truly owed. This information is gathered in a bankruptcy case by the lender filing what is known as a Proof of Claim. The bankruptcy law and rules spell out what has to be included in the Proof of Claim and time limits for when the Proof of Claim must be filed.
Without a valid Proof of Claim, it can be very difficult to deal with mortgage claims in a bankruptcy case. The purpose of the timely filing of an accurate and complete Proof of Claim is to avoid the problems listed in (2) above. The fair and honest debtor who has turned to the bankruptcy laws for relief is entitled to have his or her mortgage debt properly resolved in the bankruptcy case so that, when the case is over, that debtor can be granted the relief that he or she deserves.
There are circumstances where a mortgage payment amount changes during the course of a bankruptcy case. These changes are normally found in the promissory note that was signed when the loan was made. The bankruptcy law and rules provide a procedure which allows court oversight when this occurs. This procedure basically requires that notice be given to all concerned when this happens so that any errors can be corrected or avoided.
Likewise, there are times when additional fees, expenses, or charges are proper even after a bankruptcy case has been filed. Again, the bankruptcy law and rules require a proper notice to be given when this occurs. In times past, this had been an area that was substantially abused by some lenders. So, the law was changed to make the process more fair and transparent.
When the end of the bankruptcy case nears, there must be a determination that any arrears that existed prior to the filing of the case have been paid. This is very important for a debtor and prevents the debtor from facing a claim, after bankruptcy, that a balance is still owed. Debtors, lenders, and bankruptcy trustees all have a role to play in the process to insure that the rights of all concerned are protected.
Finally, the bankruptcy law and rules contain provisions that protect against the disclosure of personal information in order to deter identity theft. These laws and rules must be followed to minimize the risk of identity theft to innocent debtors who have sought relief in the bankruptcy courts.
Hopefully, this fine will impress upon U.S. Bank National Association the importance of following the law and rules in this area. And perhaps it might serve as a warning to others to insure that their procedures are compliant with the law and rules. Time will tell.