JP Morgan Chase Bank Agrees to Pay $22 Million To Settle Lawsuit Over Force-Placed Flood Insurance
JP Morgan Chase Bank NA (“Chase”) has agreed to pay $22 Million to settle three consolidated class action lawsuits. The three class action lawsuits alleged that Chase wrongfully force-placed flood insurance on homeowners whose mortgages were serviced by the bank. The lawsuits further alleged that borrowers were forced to carry excessive insurance and that the bank unfairly profited from it by receiving commissions and kickbacks. The plaintiffs argued that the amount of the force-placed insurance was as much as 10 times more expensive than the coverage borrowers could have obtained otherwise and more than what was required under the federal minimum standard.
Force-placed insurance is insurance that is put in place by a lender when the insurance maintained by the borrower is inadequate to protect the lender’s interest in the security. Often times with a home loan or mortgage, the lender will force-place homeowner’s insurance or flood insurance to protect its interest in the property. Usually, force-placed insurance policies are far more expensive than the insurance policies that borrowers can obtain by themselves.
Under the terms of the settlement, Chase agreed to not accept any commissions from force-placed insurance for six years and to attempt to renew the borrower’s chosen flood insurance policy if it lapses. The $22 Million settlement amount reflects approximately 75 percent of the commissions Chase received between 2007 and 2012 for force placing flood insurance. This was not the first force-place insurance lawsuit settled by Chase. Earlier this year, Chase agreed to settle a separate Florida class action regarding force-placed insurance for $300 million.
The misconduct of banks and financial institutions has been well publicized over recent years. In 2011, the Government instituted a watchdog organization called the Consumer Financial Protection Bureau (“CFPB”). The CFPB is tasked with monitoring the activities of banks, credit unions and other financial institutions. The CFPB has already doled out large penalties against financial institutions that it has determined are treating consumers unfairly.
In 2012, a settlement was reached between 49 state attorney generals and the five largest mortgage servicers in the United States. The settlement provided for $25 billion in relief to homeowners and direct payments to the states and federal government. The settlement was a result of discovering systemic wrongdoing in the processing and signing of foreclosure documents.
Banks and financial institutions are in the money business. They strive to increase profits and lower their bottom line. Unlike small community banks of old, today’s banks are giant conglomerates where a consumer is just a number and there are no longer personal relationships. However, there are a multitude of laws and regulations that financial institutions must follow when dealing with consumers. If you were treated unfairly or believe you have experienced any form of financial institution misconduct, you should contact the attorneys at the Piccuta Law Group, LLP for a case consultation.