Questioning Bank of America’s Consumer Relief Measures

Is Bank of America upholding its promise to provide consumer relief when it comes to mortgages and other kinds of loans? According to a recent article in the New York Times, “questions are arising about whether the promised assistance is actually getting to the right people and whether the bank will be allowed to claim credit for consumer relief that far exceeds its actual value.” In other words, questionable dealings concerning foreclosure and consumer bankruptcy might still be lurking.
Consumer Relief and the Terms of the Settlement
Last summer, Bank of America agreed to a $16.7 billion settlement “over dubious mortgage practices.” Of the money from that settlement, $7 billion was supposed to go toward consumer relief measures, including loan modifications in the years following the agreement. In addition, the settlement required the bank to “make a wide array of loans more affordable for borrowers” and to “forgive or reduce the amounts owed on first and second mortgages.” As compensation for these actions, Bank of America “would receive credit for these reductions in dollar amounts outlined in the settlement.”
But the bank doesn’t appear to have come through for many borrowers. To be sure, consumers have reported that Bank of America contacted them to say that certain debts—already discharged in a consumer bankruptcy proceeding—would be “forgiven.” For instance, one consumer filed for Chapter 7 back in 2010 and had debts with Bank of America extinguished, including a home equity line of credit for more than $54,000. The consumer, however, received a letter from Bank of America that offered her “a full principal forgiveness” on that loan.
While the consumer isn’t responsible for the debt, if she doesn’t “opt out” with Bank of America, the bank will be able to claim a credit for this type of loan forgiveness action. Richard Simon, a spokesperson for Bank of America, indicated that in situations like the one just described, the bank’s crediting “would be limited to a maximum of 40 percent of the total amount extinguished.” However, John Rao, an attorney with the National Consumer Law Center, described such crediting as “excessive.”
Timing and Consumer Contact
Did you recently receive a letter from Bank of America approving you for forgiveness on a loan previously discharged through bankruptcy? You’re not alone. According to the article, the bank “receives extra credit under the settlement” if it offers consumers certain kinds of relief by a deadline—August 31st of this year. And much of that relief appears to be coming to consumers who won’t benefit as much as the bank will. Currently, hundreds of bankruptcy attorneys across the country have clients who have received promises of loan forgiveness after a bankruptcy discharge, totaling hundreds of thousands of dollars.
While it’s possible that Bank of America didn’t have knowledge of the bankruptcies before sending out letters concerning loan forgiveness, it seems very disingenuous that the bank could receive credit for this type of consumer “relief.”  
If you have questions or concerns about how Bank of America’s consumer relief measures might affect you, it’s important to speak with an experienced Oak Park consumer protection attorney. Don’t hesitate to contact a dedicated advocate at the Emerson Law Firm.
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