Newspaper headlines and stories in 2009, shocked consumers at the brunt of the banking fallout. Soon after, consumers began to feel the weight of banking scandals that robbed their bank accounts, and put thousands in jeopardy of foreclosure. The banks were already prepared to handle the millions of consumer complaints, and had trained personnel on aggressive collection procedures.
Some of the signs that consumers noticed first were foreclosure letters that were received when the mortgage was already paid, and tens of daily calls to the borrower from their bank asking for them to make another payment, warning the borrower that the already provided payment was not listed in their system.
In most of the cases the lender received the payments and stalled the recording and deposit of the payment. This is verified by through BillPay, where a bank is instructed electronically by the customer to pay a bill either through an electronic transfer or a written check. Either way the payment is date and time stamped by the debiting bank, and if mailed the bank uses the closest facility to the creditor to generate and mail the check which is also date recorded.
In many cases the creditor held payments for up to 20-days before recording the original payment. The debiting bank had already confirmed to the consumer the delivery, and on some occasions the already deposited payment by the creditor.
Credit card accounts were not left out of the scandal; extraordinarily high interest rates were imposed that made consumer payments impossible. Many consumers were alerted to increased rates through collection calls. Interest rates jumping from 2.9% to as high as 79.9% caused alarm to consumers with existing balances. The payments skyrocketed too; especially for real estate investor John Phillips, of Portland, Oregon, who had always looked forward to points that could be accumulated and used towards airline tickets. His typical monthly payment of $250 had climbed suddenly to $1,600 a month due to a rate hike. Struggling with the new monthly payment and its affect on his ability to pay for his real estate mortgages, he called Chase Bank to negotiate. After several months and phone calls, he was able to negotiate a deal that was less than the $1,600.
Accompanying the mortgage and credit card scandals, were the imposed fees. Payments less than the new monthly amount, were assessed Late Payment fees. If the fee on credit accounts caused the account to go over-the-limit the consumer is assessed an Over-The-Limit fee. The fees were paid first and the remainder of the payment is applied to the amount due. In many cases the credit card limit was reduced without the consumer knowing, and in some cases the limit was lowered to below the existing balance causing the account to be automatically overdrawn warranting a fee.
Checking and savings accounts weren’t exempt from the scandal, as BillPay and debit card accounting paid the largest bills first if the account was low on funds the smaller multiple charges would generate several Over-Draft fees ranging upward of $39 each.
Bank deposits of payroll checks under $5,000 were held without good cause for up to 14-days. Typical instruction by bank tellers from Bank of America, were that the deposited check from a national bank would be ready for spending the same day. The consumer prepared for making purchases did so, through BillPay, and debit card for the duration and at some point either their debit card was declined or their monthly statement arrived. The monthly statement reflected up to a $1000 in $39 Over-Draft fees.
It doesn’t take an expert to assess the problem and figure out what the socially responsible decision by the creditor could have been. Checking and Savings accounts are not credit card accounts, and therefore if there aren’t sufficient funds in an account a bank shouldn’t make the transaction or charge a fee. Likewise, a credit card company could choose to lend only an amount to borrowers that it knows the consumer can actually pay back in full each month. In lieu of high rate hikes a creditor can choose to convert the balance to a loan at market rates and terms, and close an open-end account to allow a consumer to make affordable payments to satisfy the debt.
In all circumstances homeowners experience a significant loss of available funds and become uncertain about whether they will be able to afford their mortgage, especially in the event that their credit card company sues and garnishes them. Which is common among residents that live in counties that do arbitration and not mediation of debts.
The overreaching creditor tactics for many consumers have been similar to historical uncaring gangster style debt collection. Most consumers experienced robo-calls, and for some as many as 20-calls per day, along with several letters per month for the same debt. As the collection phone calls disturbed consumers at their workplace, during meal times, and events, their mailboxes were filled with collection letters, complaints of anxiety grew. Many consumers had no defenses to the monotony even in the request to their creditor to cease communication. Some consumers reported that they were laughed at, and mocked by the debt collector.
In cases where the consumers credit card and mortgages were at the same bank, the lender offered to consolidate the small credit accounts onto the mortgage if they could refinance the existing mortgage at a higher rate such as 8.5 to 9.5%. Of course there were closing costs associated with the refinance as well.
Three years fast forward, the aftermath is what most expected and the banks were gambling on. Thousands of consumers no longer have good credit ratings and are paying higher rates for credit. Thousands of homes sit empty, or are pending formal foreclosure due to owners no longer able to pay their debt, and no longer qualified to acquire a mortgage.
The second wave of credit collections for hard hit consumers is coming. Those homeowners that sold a home in a short-sale that did not acquire a legal form from their lender that states that they will not pursue them for the deficiency in the short-sale, are subject to collections up to 26-years or until they file bankruptcy. The lenders will most likely sell those debt papers to collection companies to step aside from the process. The banks will most likely wait for an economic recovery period for the consumer before beginning the debt collection process for the deficiency of the mortgage amount. Short-sales are good for the buyer and can be financially devastating for the homeowner in the future.
Post your comments on youtube about whether you trust your bank.