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Of the five largest U.S. banks, Bank of America (NYSE: BAC ) is probably the best known for the loathing it inspires in customers and non-customers alike. At the root of this disdain is its awful customer service, which sometimes borders on the creepy -- including actions revealed in the Home Affordable Modification lawsuit in Boston this past summer, in which former employees described being rewarded by management for foreclosing on desperate homeowners.
The big bank's disregard for its customers has become a pattern evident to the most casual observer, despite CEO Brian Moynihan's efforts to improve B of A service. Now, a U.S. bankruptcy judge has levied a monthly fine of $10,000, plus attorneys' fees, upon Bank of America for knowingly dunning a couple for payment of a discharged debt -- despite being told to stop doing so.
"This is policy"
Judge Robert D. Drain, of the U.S. Bankruptcy Court in the Southern District of New York, seemed somewhat miffed by Bank of America's actions, spelled out in his ruling on a contempt motion against the bank. Drain noted that B of A had full knowledge of the bankruptcy discharge on the loan that Edwin Ramos and Michelle Stouber-Ramos once had on their home, yet continued to send the couple monthly statements demanding payment.
Though the bank still maintained a lien on the home, it was prohibited from pestering the couple with mailings and phone calls concerning payment of the loan, which B of A knew to have been discharged. The bank had been notified twice about its behavior, yet persisted in its harassment. The judge used another, similar case involving B of A, wherein the bank sent only appropriate notifications concerning the lien to its former customers, to make the point that the bank knew how to conduct itself in this particular situation. Since the bank's behavior was not due to error, the judge asserted that it was deliberate, and therefore a matter of corporate "policy."
The worst of the worst
Other megabanks have been sanctioned for lousy treatment of customers as well. JPMorgan Chase (NYSE: JPM ) recently settled with regulators over its error-ridden debt collection practices, including charges that it pushed consumers into buying unwanted credit-related services.
Wells Fargo (NYSE: WFC ) is now being sued by New York Attorney General Eric Schneiderman for not observing the terms of last year's National Mortgage Settlement, with the AG's office noting -- at least in this particular case -- that Bank of America has stepped up and is working to rectify its own shortcomings. For its part, Wells has denied that it has been remiss regarding the settlement, which was brought about because of big-bank shenanigans, including the now-famous "robo-signing" of mortgage documents.
Bank of America, however, has quite a long history of mistreating its customers. Just about three years ago, the bank was sanctioned for hounding another couple with whom Countrywide signed a consent order in 2008 releasing them from their mortgage debt during foreclosure. For the following two years, B of A called the couple's home hundreds of times demanding payment -- even though the bank itself had signed the agreement.
Just last month, Bank of America settled charges "to avoid further legal costs" pursuant to its tendency to robo-call customers' cell phones. The bank did not admit wrongdoing, but its $32 million settlement is the largest in a case brought under the Telephone Consumer Protection Act, enacted to prevent just these kinds of annoying calls.
While bad behavior on the part of the nation's biggest banks seems almost routine since the financial crisis, B of A's willful customer badgering is alarming. In each of the previous examples, the bank knew full well that what it was doing was wrong -- even illegal -- yet pressed on anyway.
As Judge Drain put it, this behavior seems to be more a matter of policy than a series of innocent mistakes. It looks like Bank of America has a corporate culture of intimidation that is resistant to change, even coming from its CEO. Such an attitude can't be good for business and may be reflected in its slow recovery from the crisis.
If shareholders ever want to see a decent dividend from Bank of America, they might have to raise their voices in unison to put a stop to these odious business practices. While a tarnished image is only one of the problems plaguing B of A, it is one that is relatively easy to fix -- and it is in stockholders' interest to see that the bank takes this issue seriously -- before it's too late.
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