bear sterns fine

     Washington D.C. (CN) – Bear Stearns and its subsidiary EMC Mortgage agreed to pay $28 million in a settlement with the Federal Trade Commission on violations charges , after they defrauded what the FTC estimates to be tens of thousands of customers.
     “The companies violated four different federal laws. We hope people in mortgage servicing companies will read this judgment and adhere to the law” says Frank Dorman, the spokesperson for the FTC.
     Apart from misrepresenting the amounts borrowers owed, the mortgage companies charged unauthorized fees to clients. One such fee was the $500 loan-modification fee, which was automatically added to the loan’s principle balance, without notice to the client.
     The companies also made harassing collection calls, where they would wrongly state the legal status or amount of the customers’ debts.
     The defendants also failed to notify customers of their right to obtain verification of the debt, or of their right to dispute the debt. When the loans were contested, the companies failed to report the dispute to credit reporting agencies, as required by law.
     The mortgage companies did, however, illegally share information about the customers’ payment status with credit reporting agencies.
     In total, the FTC Act, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and regulation Z of the Truth in Lending Act were all violated.
     Apart from the $28 million in redress to affected customers, the settlement prohibits the companies from violating these laws in the future, and requires that they establish and maintain a comprehensive data integrity program to ensure accuracy of their data regarding consumers’ loans.
     No fines were imposed.
     The companies must also hire a qualified and independent group to ensure the integrity program meets the standards specified by the settlement. The third-party must assess the program within the next six months, then every two years for the next eight years.
     To monitor the defendants’ compliance, the FTC included in the settlement record-keeping and reporting provisions.
     Bear Steams and EMC Mortgage are represented by Kevin Arquit, from Simpson Thacher & Bartlett.

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