The former Bear Stearns Co., absorbed by J.P. Morgan Chase & Co. following its Bear Stearns’ near-collapse this year, has agreed to pay $28 million to redress consumers who were harmed by the company’s illegal home-mortgage loan practices. Under the settlement announced by the Federal Trade Commission, Bear Stearns and its mortgage unit, EMC Mortgage Corp., must establish and maintain a consumer-loan data-integrity program and bring in an independent agency to oversee the accuracy of the company’s consumer-loan information every two years for the next eight years.
The action stems from the FTC’s investigation into subprime-loan practices. The civil charges, filed in a Texas-based U.S. District Court, allege that during the mortgage boom, the company misrepresented the amounts borrowers owed on their loans, wrongfully charged extra fees for things such as property inspection, and also engaged in abusive collection practices. Lydia B. Parnes, director of the FTC’s Bureau of Consumer Protection, observed: “Consumers have the right to expect accuracy from the company that collects their mortgage payments.”
The FTC alleges that Bear Stearns employees made harassing phone calls to collect on debt, reported information about defaults to credit agencies and then failed to inform those credit agencies when customers disputed the claims. As you will recall, the subprime-mortgage housing crisis left Bear Stearns on the brink of collapse earlier this year as banks increasingly refused to do business with the firm. In March, J.P. Morgan Chase agreed to acquire the troubled firm for a fraction of its worth, with the Federal Reserve providing $30 billion in funding. That acquisition was completed in May.
Source: Wall Street Journal
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