The lawsuit alleges that the big banks engaged in mass reductions of Home Equity Lines of Credit (HELOC) limits and even suspended accounts, by falsely claiming that customers' incomes had been reduced, as a way to justify the suspensions. Here's an excerpt from a press release on the class action;
"The message to former WAMU customers and others is clear: Chase is coming after your home equity credit line," said attorney Jay Edelson, whose firm, KamberEdelson, LLC, (n/k/a Edelson McGuire, LLC) previously filed a similar lawsuit against CitiBank. "When banks take billions of dollars in taxpayer money, they have an extra duty to follow both the letter and the spirit of the law. We believe that congressional hearings should commence immediately," Edelson explained. (more)Here's an interesting development on this issue from the state of Florida:
Incoming Senate President Calls for Hearings to Investigate Banks for Fraudulently Reducing Consumer Home Equity Loans;
Sen. Mike Haridopolos also calls on members of Congress to investigate these claims.
Incoming Senate President Mike Haridopolos today called for hearings in Tallahassee to investigate claims that after banks received hundreds of billions in federal bailout money they squeezed consumers and fraudulently or arbitrarily reduced Home Equity Lines of Credit (HELOC) to improve their own bottom lines.
"I have heard the stories of this happening across our state and our country, and the courts are filled with lawsuits," says Haridopolos (R-Merritt Island). "This needs to be investigated because if true it's outrageous. The very banks that are bailed out with taxpayers' money then stick it to homeowners?"
Haridopolos says he is asking his Washington counterparts to honor their promise to call hearings as well.
"When Congress gave away the taxpayers' money to the banks, they guaranteed the public that if the banks did not use it to lend money, they would immediately call for hearings and hold the banks accountable," says Haridopolos.
Indeed, Democrat leaders like Sen. Chris Dodd (D-Conn.) promised: "If it turns out that [the banks] are hoarding, you'll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay."
"Since then, we have seen the President sit down with the leaders of the big banks and refuse to meet with the average Americans who are being hurt by their practices," Haridopolos says. "Because of this, it's of little surprise that Democrat leaders, like Sen. Durbin, have since conceded that the banks control the federal government. I can tell you, the banks may control D.C., but the people control Florida and we're going to keep it that way."
Haridopolos was referring to Sen. Dick Durbin's confession last year that as ""hard to believe in a time when we're facing a banking crisis that many of the banks created - [the banks] are still the most powerful lobby on Capitol Hill. And they frankly own the place."
Although federal regulations permit account suspensions when financial circumstances adversely change or when properties suffer a substantial decline in their property, many homeowners are claiming that the banks are use false pretenses as excuses to call in home loans.
It is common for families to take out a Home Equity Line of Credit to make improvements to their homes to use as a cushion should they need extra cash for emergencies. There have been a slew of private lawsuits against the biggest banks that received loans including JP Morgan Chase (NYSE:JPM), Washington Mutual (NYSE:WM), CitiGroup (NYSE:C) and Wells Fargo (NYSE:WFC) that they engaged in such behavior.
Haridopolos said he wants his hearings to include testimony from homeowners, consumer groups, and the banks so that everyone has a chance to publicly weigh in.
For additional information on mortgage servicing practices, and lender practices, read a few earlier blogs. Also see Talk Back South Florida - Sun Sentinel Editorial Blog.