JPMorgan Chase is paying $5.1 billion to Fannie/Freddie to settle some of its CDO skullduggery in the mortgage-backed securities fiasco responsible for the 2008 financial crisis. As a direct result, the financial behemoth is posting a third quarter loss of $400 million.
Put its latest payout on the tab: JPMorgan has been bleeding settlements since early 2011, often though not exclusively as fallout from the financial crisis and ensuing recession that it helped to enable. Here are all the major deals reached by JPMorgan, as tallied by The Daily Beast (note that while JPMorgan does not Officially Ratify & Confess its wrongdoing as part of its settlements, readers are encouraged to give limited credence to the veracity of a duly-negotiated settlement term and let the payments speak for themselves):
• $.056 billion, April 2011 - illegally foreclosing on active-duty servicewomen and men
That's a total of about $23 billion, which does not include the undisclosed January 2013 settlement, the pending charge that JPMorgan neglected to properly vet its investments with Bernie Madoff, or its attorney's fees incurred in defending these cases. Stocks are down $0.17/share as a result of the latest settlement, which is practically nothing, but I'm betting the annual hanging of the latest "...But No Liability Admitted!" plaques at the stockholder meeting is getting somewhat tenser.
Congress passed the Fair Debt Collection Practices Act in the late 70s "to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses."
It's time to update it a bit. I propose the following changes:
1. The statutory penalty for a violation is $1,000, actual damages, court costs, and attorney's fees. Pushing the costs of enforcement (attorney's fees and costs) onto the collectors was a compromise: collectors would dodge comprehensive federal oversight and regulation but would have to pay the cost of private enforcement. But! The $1,000 statutory penalty cap has not changed since 1977. The value of the dollar has changed greatly since 1977. According to the Bureau of Labor Statistics, $1,000 in 1977 is worth $3,859.36 in 2012 dollars. I'm not an unreasonable man, and I see the value of compromise. Raise the cap in 1692k to $2,500.00 and we'll call it even.
2. The FDCPA prohibits "false, deceptive, or misleading representation[s]." Is it deceptive to try and collect a debt that is passed its statute of limitations (that can no longer be enforced) without telling the consumer as much? It depends on the federal circuit! Outstanding circuit splits create inconsistent enforcement, which is bad. Trying to collect an expired debt from someone without telling them its expired is bad. Congress should add the following language to 1692e: "The following conduct is a violation of this section . . . Attempting to collect any debt that has passed its statute of limitation without disclosing that it has passed its statute of limitation in each communication with the consumer."
3. "Debt collector" is defined too narrowly in 1692a. Currently it is "any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another." Change "the principal purpose" to "a substantial purpose" to cover collection activities conducted by companies that frequently collect debts but that engage in other activities too. Why should their other activities somehow exclude them from liability for their collection?
More to come.
William G. Young, a Massachusetts Federal Judge, is so dismayed with the litigation strategy of Seyfarth Shaw, the Chicago-based law firm representing Wells Fargo in Henning v. Wachovia Mortgage FSB aka Wells Fargo Bank, NA (11-11428-WGY), that he is requiring Wells Fargo's President and Board to ratify its actions.
Wells Fargo won its argument in Henning on a (some might say) subversive technical defense that fully defeated Henning's claims before he could even get to the substantive merits of the case. Judge Young considered this strategy at odds with Wells Fargo's "consumer-friendly" face, and issued a ruling requiring Wells Fargo's president and board to ratify its chosen defense:
And so, Wells Fargo wins on a technicality. The court never addresses the merits of this case and expresses no opinion thereon. Still, it is appropriate to point out that, were Henning to prove his case on the merits, the conduct of Wells Fargo would be shown to be nothing short of outrageous . . . .
Judges nationwide: take notes.
UPDATE: Wells Fargo's counsel-- a touch unsurprisingly-- have filed for a mandamus review of the order, where a superior court will review whether Judge Young's abused his discretion in requiring the corporate resolution. If successful, Wells Fargo will overturn the requirement and win without needing a signature from its board of directors. In other words, Wells Fargo wants its attorneys to win the case on a technicality and is pursuing every possible legal measure to avoid owning up to doing so. Behold, our lending institutions.
An Occupy Wall Street spinoff group called Occupy Money Cooperative is attempting to establish a debit card that seeks to offer "low-cost, transparent, high quality financial services to the 99%." This is a good idea. It's flagship product is the Occupy Card, a debit card that purports to "provide the basic financial services that people need and use on a daily basis without the cost, or the balances required for a regular bank account."
This is a great, if not altogether new, concept. In fact, not-for-profit banking organizations focused on keeping retail banking costs as low as possible already exist in the form of credit unions. The prospect of everyone taking their money out of Wells Fargo and putting it in Affinity Plus fairly terrifies for-profit banking institutions, who rely on the huge amounts of cash-on-hand a big retail banking base provides, and who have lobbied like the dickens to keep credit unions limited in size and power for decades with wildly successful results. By law, credit unions must limit their pool of eligibility for membership. If this seems arbitrary and anti-market, that's because it is. It's the naked result of the financial lobby's attempts to retain control of everyone's money. From a purely avaristic point of view it's not hard to see why they want it: consumers paid $32 billion in overdraft fees in 2012. That is a lot of money for nothing.
As Hamilton Nolan, resident money wonk at Gawker, argues, a widely-available, cheap card could "save poor people money, and provide a service, and be a thumb in the eye to big banks all at the same time." And he is right! But the Occupy Card in its current form is not that card.
We'll use as comparison my old debit card with TCF Bank, which I had until November 2011. Draws from a TCF ATM were free, and you were allowed four draws from non-host ATMs before it started charging $1.75 each time. Overdrafts were, if I remember, $30 a transaction, which was pretty bogus. But on a normal year I probably didn't spend any money to maintain the card, because I almost never overdrafted (no small feat for a college student) and I lived within a half mile of about 10 TCF ATMS. Closing the account was free.
Compare this to the costs of the Occupy Card. A $.99 monthly fee, a $1.95 ATM draw fee (that's on top of what each ATM charges, since there are no native Occupy ATMs (yet?)), a $2 fee for contacting customer service, $2 for declining at an ATM, $12 to close your account, and $9.99 to replace the card.
This is not cheap for a card billing itself as such. It's not cheap compared to cards offered by for-profit financial institutions, and its especially not cheap compared to other not-for-profit institutions. I would be surprised if I've spent anything on my current credit union card. You couldn't say the same of the Occupy Card, not if you have a question for them or want to have a card for a month or close your account or withdraw any money.
A low-cost, widely-accessible charge card would be great. You know, hypothetically.
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