When a Bank Has to Shell Out Money for a Mega Class Action Real Estate Lawsuit

by Isaac Benmergui, Esq on November 15, 2013

It’s not a pretty picture when it happens, but what else can a financial institution do but cough up the money? Most notably, it was recently in the news that banking giant JPMorgan Chase and Assurant Inc. settled in a major suit involving high rates through forced-placed insurance policies. What was the settlement? Oh, a simple, small amount of $300MM. Just a chunk of change.

That may be just the start of it, too, as many other entities are facing similar heavy class actions, such as: lightning

  • Bank of America
  • Citibank
  • Wells Fargo

The skinny on these actions claim from plaintiffs that insurance policies forced onto properties were overcharging. This is particularly an issue when such properties were, in fact, underinsured or not insured by the homeowners. How is that possible? Nothing more than kickbacks paid by insurers to lenders, providing their force-placed businesses, which included commissions, low-cost or free administrative services and even highly doubtful reinsurance arrangements with bank affiliates.

How will Chase handle the settlement? Pretty cut and dry, actually. The bank will plan on providing refunds of 12.5% of all annual premiums for the entire set of force-placed policies while refraining from premium inflation for a period of six years. Maybe that’ll calm the storm down. At least for Chase. For those other institutions, the storm is just beginning….

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