Chase Gets Off the Hook, ABI Gets $7.5m, Debtors Get $20

We’ve heard on the street that the $20 checks for debtors are starting to roll in.  The payments are part of a $50 million settlement between the United States Trustee Program and JP Morgan Chase, N.A. that was approved by the Bankruptcy Court for the Eastern District of Michigan on March 9, 2015.

The settlement concerns approximately 50,000 improper payment change notices filed by Chase in thousands of bankruptcies across the country.  The improprieties of these notices range from failing to review the accuracy of the notices before filing, to notices signed in the names of employees or former employees who had nothing to do with the accuracy of the notices.  See the Department of Justice press release here for further information.

The settlement includes a variety of remedies for affected homeowners in bankruptcy.  These range from outright forgiveness of the loan (for only 325 loans), adjustments/credits to credits, suspense accounts or escrow accounts (for 30,508 loans); and/or cash payments in the amounts of $600.00 and/or $20.00 (for 18,908 loans).  Some debtors have already started receiving these cash payments.  The settlement also includes a payment of $7.5 million to the American Bankruptcy Institute’s endowment for financial education and support for the Credit Abuse Resistance Education Program.

There have been several concerns raised regarding the settlement.  It appears no parties outside the USTP were consulted as to the practical ramifications to ongoing bankruptcies including standing chapter 13 and 7 trustees and debtors’ counsel.  The USTP has been given no record or database of names of the thousands of affected debtors by Chase’s improper notices.  The parties appointed an Independent Reviewer, Ms. Amy Walsh of The Morvillo law firm, to verify whether Chase fulfils its settlement obligations and to verify Chase’s numbers of incorrect notices by a sampling methodology.  Of note, the Morvillo law firm lists on its Representative Clients webpage that its partners have also represented officers, director or partners in several financial institutions including J.P. Morgan.

The order and the settlement can be found here.