51 Ways Bank of America Abused Our Trust and Squandered Its Reputation

It's been less than a month since I last updated my comprehensive tally of Bank of America's (NYSE: BAC  )  post-financial crisis legal settlements. In this brief time period, however, the list has already expanded to include billions of dollars more in potential damages.

In April alone, Bank of America announced three new legal settlements. The first, involving securities fraud claims against Merrill Lynch by insurer The Allstate Corporation, covered an estimated $167 million in mortgage-backed securities. The second, encompassing identical claims brought by Allstate against Countrywide Financial, may have cost Bank of America upwards of $700 million -- precise figures weren't disclosed in either case. And the third concluded analogous litigation between Bank of America and Financial Guaranty Insurance Co. for $950 million.

More disturbing than either of these, however, are revelations related to new settlements that are purportedly in the works. One, which I discuss at length here, relates to a $2.5 billion case brought by Ambac Financial Group against Bank of America and its legacy companies. A second, discussed here, would resolve investigations by state and federal agencies into the bank's sale of mortgage-backed securities prior to the crisis. And a third would put an investigation by the Consumer Financial Protection Bureau into Bank of America's credit card practices to rest -- to read more about this one, click here.

All told, combined with the ongoing legal battle between the bank and American International Group, these disputes could still cost the nation's second-largest lender by assets more than $10 billion, if not more. Without future ado, in turn, here's the updated list of Bank of America's legal misdeeds since the financial crisis:

Date

Description

Settlement/Judgment Amount

Pending

According to The Wall Street Journal, Bank of America is engaged in "multibillion-dollar settlement talks with the Justice Department to end investigations into shoddy residential mortgage backed securities."

While it isn't clear how large a settlement will be, the government's lead negotiator is said to have demanded a figure "billions of dollars above the $2.4 billion in legal charges" that Bank of America outlined in its latest quarterly earnings release.

Pending

Bank of America continues to litigate its dispute with American International Group over toxic mortgage-backed securities sold by the bank and its legacy companies.

American International Group has amended its complaint multiple times, and is now seeking $5 billion in damages.

Pending

Rumors began circulating in April that Bank of America is concluding a settlement with mortgage-bond insurer Ambac Financial Group stemming from toxic mortgage-backed securities sold by the bank and its legacy companies (namely, Countrywide Financial) in the lead up to the crisis.

According to Bank of America's latest annual report, Ambac is seeking roughly $2.5 billion in damages.

Pending

Bank of America is in talks with the Consumer Financial Protection Bureau to settle allegations that it "forced customers to sign up for extra credit card products."

Media reports put the figure at $800 million.

April 2014

Bank of America settlement of securities fraud claims related to mortgage-backed securities sold by Merrill Lynch to Allstate.

Undisclosed (the lawsuit covered $167 million in mortgage-backed securities)

April 2014

Bank of America settlement of securities fraud claims related to mortgage-backed securities sold by Countrywide Financial to Allstate.

Undisclosed (ALL was seeking $700 million)

March 2014

Bank of America settlement with Financial Guaranty Insurance Co. over toxic second-lien residential mortgage-backed securities.

$950 million

March 2014

Bank of America settlement with the Federal Housing Finance Agency over claims that the bank -- principally, Countrywide Financial -- defrauded Fannie Mae and Freddie Mac.

$9.5 billion

March 2014

Bank of America and former-CEO Ken Lewis settlement of securities-fraud charges with the New York Attorney General related to the bank's 2008 acquisition of Merrill Lynch.

$25 million

February 2014

Bank of America settlement of class action force-placed insurance dispute, claiming that it engaged in a "kickback scheme inflating the cost of insurance that homeowners were forced to buy."

$228 million (though QBE Insurance Corp. was included in the settlement)

December 2013

Merrill Lynch settlement with the Securities & Exchange Commission related to the structuring and sale of complex mortgage securities to institutional investors in 2006 and 2007.

$131.8 million

December 2013

Countrywide settlement with Freddie Mac related to faulty mortgages sold to the government-sponsored entity from 2000 to 2009.

$404 million

October 2013

Bank of America found liable for fraud over defective mortgages sold to Fannie Mae and Freddie Mac as a part of a shoddy home loan process at Countrywide known as the "Hustle."

$2 billion (the court has yet to rule on damages, but this is roughly what the government is seeking)

September 2013

Settlement to resolve claims that Bank of America employees made harassing debt collection calls to customers' cell phones in violation of the 1991 Telephone Consumer Protection Act.

$32 million

September 2013

Bank of America fined by the U.S. Department of Labor for hiring practices that kept qualified black job applicants from getting jobs.

$2.2 million

September 2013

Merrill Lynch settlement to resolve a class action gender discrimination lawsuit brought by female brokers alleging they were "paid less than men and deprived of handling their fair share of lucrative accounts."

$39 million

August 2013

Settlement to resolve a class action racial discrimination lawsuit alleging that Merrill Lynch segregated its workforce by, among other things, steering black brokers into clerical positions and reassigning their accounts to white workers.

$160 million

June 2013

Settlement to resolve claims that Countrywide "deceptively lured consumers into buying loans with higher interest rates than originally promised."

$100 million

June 2013

Fined by the Financial Industry Regulatory Authority after an investigation found that Bank of America's brokers steered retail investors toward a type of mutual fund that was riskier than what they were seeking.

$2 million

May 2013

Settlement to resolve claims brought by mortgage-bond insurer MBIA (NYSE: MBI) related primarily to toxic mortgages originated mainly by Countrywide.

$1.7 billion

April 2013

Settlement with private investors in a class action securities-fraud lawsuit involving Countrywide-issued mortgage-backed securities.

$500 million

April 2013

Bank of America settlement with the National Credit Union Administration to resolve claims stemming from sales of mortgage-backed securities to credit unions that led them to fail.

$165 million

February 2013

Settlement to resolve allegations that Merrill Lynch failed to pay proper overtime to its client associates.

$12 million

February 2013

Settlement to resolve a class action lawsuit alleging that Bank of America violated the Real Estate Settlement Procedures Act by failing to respond to mortgagees' requests for information relating to the servicing of their home loans.

$19 million

January 2013

Bank of America joined with nine other lenders to resolve claims of foreclosure abuse related to the financial crisis. The aggregate settlement for all participants was $8.5 billion.

$2.9 billion

January 2013

Settlement with Fannie Mae resolving claims that Bank of America -- namely, Countrywide -- sold tens of billions of dollars' worth of faulty mortgages to the government-sponsored entity.

$11.2 billion

September 2012

Bank of America settlement of class action lawsuit brought by B of A's shareholders alleging that the bank provided "false and misleading statements about the health of" Merrill Lynch in the lead-up to the acquisition. The deal was approved by a judge in April of 2013.

$2.43 billion

July 2012

Bank of America settlement of class action lawsuit alleging that the bank "used deceptive marketing tactics to sign up and charge credit card customers for a useless credit-protection service."

$20 million

July 2012

Settlement with Syncora Holdings regarding claims that the mortgage-bond insurer was duped into insuring Countrywide-issued mortgage-backed securities.

$375 million

February 2012

Bank of America settlement with federal and state regulators and agencies related to faulty foreclosure and servicing practices.

$11.82 billion ($3.2 billion in federal and state payments, $8.58 billion in relief to borrowers)

December 2011

Settlement of U.S. Justice Department charges that Countrywide carried out a "widespread pattern or practice of discrimination against qualified African-American and Hispanic borrowers."

$335 million

December 2011

Settlement of class action suit against Merrill Lynch brought by investors alleging that the investment bank misled them about the risks associated with $16.5 billion of mortgage-backed securities in 18 offerings made between 2006 and 2007.

$315 million

August 2011

Bank of America settlement with the City of San Francisco over allegations that the bank's FIA Card Services used a rigged system to arbitrate credit card debt collection disputes.

$5 million

June 2011

Countrywide reaches preliminary $8.5 billion settlement with The Bank of New York Mellon and 22 institutional investors (including Goldman Sachs and Blackrock) over toxic mortgage-backed securities.

$8.5 billion

May 2011

Countrywide settlement with the U.S. Department of Justice over allegations that Countrywide "wrongfully foreclosed upon active duty servicemembers without first obtaining court orders."

$20 million

April 2011

Countrywide settlement with mortgage-bond insurer Assured Guaranty over toxic Countrywide-issued mortgage-backed securities.

$1.6 billion

February 2011

Bank of America settlement of class action lawsuit claiming that it "improperly increased the interest rate on delinquent or defaulted FIA, MBNA and Bank of America credit cards by calculating the rate increase starting at the beginning of the billing cycle in which the default or delinquency occurred."

$10 million

January 2011

Bank of America settlement of class action debit card overdraft lawsuit. Here's how one plaintiff described it: "The bank actively provides false or misleading balance information to these customers, including plaintiff, that in turn deceives these customers into making additional transactions that, in turn, will generate even more overdraft fees for the bank."

$410 million

January 2011

Settlement with Freddie Mac to "end all claims, including future claims, related to mortgages sold through 2008 by Countrywide."

$1.28 billion

January 2011

Settlement with Fannie Mae to settle claims on 12,045 Countrywide loans originated between 2004 and 2008.

$1.52 billion

December 2010

Bank of America settlement with 19 state attorneys general and four federal agencies over bid-rigging charges in the municipal bond market.

$137 million

November 2010

Countrywide settlement of class action lawsuit related to overcharging for mortgage insurance in violation of the Real Estate Settlement Procedures Act of 1974 (RESPA).

$34 million

October 2010

Bank of America covers part of former Countrywide CEO Angelo Mozilo's $67.5 million civil fraud settlement with the SEC.

$20 million

July 2010

Bank of America settlement of class action antitrust claims regarding credit card arbitration.

$0 (injunctive relief)

June 2010

Countrywide settlement with the Federal Trade Commission over allegations that it overcharged customers who were struggling to hang onto their homes.

$108 million

May 2010

Countrywide settlement of class action securities fraud claims made by institutional investors, including New York pension funds, alleging that the lender misled them about its health.

$600 million

February 2010

Bank of America finalizes settlement with the SEC over its failure to "properly disclose employee bonuses and financial losses at Merrill Lynch before shareholders approved the merger of the companies in December 2008."

$150 million

July 2009

Bank of America settlement of racial discrimination class action accusing it of "routinely giving black workers short shrift with respect to pay, advancement and resources."

$7.2 million

June 2009

Bank of America finalizes settlement with Securities & Exchange Commission and several states over alleged misrepresentations the bank made to customers about the safety and liquidity of auction-rate securities.

$4.5 billion in "restored liquidity" to the ARS market

January 2009

Merrill Lynch settlement of securities fraud case with institutional investors in its common and preferred shares between Oct. 17, 2006 and Dec. 31, 2008. The plaintiffs alleged that the investment bank inflated the price of collateralized debt obligations (CDOs) in order to boost its own share price.

$475 million

October 2008

Countrywide settlement with eleven states over predatory lending allegations including, relaxing underwriting standards, structuring loans with risky features, and misleading consumers with hidden fees and fake marketing claims like its "no closing costs loan."

$8.4 billion in "direct loan relief." At the time, "it was the largest predatory lending settlement in history, far exceeding the $484 million deal struck in 2002 with the Household Finance Corporation."

Sources: Bank of America, U.S. Dept. of Justice, New York Attorney General's Office, Securities and Exchange Commission, Federal Trade Commission, Reuters, Bloomberg, The New York Times, and The Wall Street Journal.

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Read/Post Comments (7) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 27, 2014, at 7:05 PM, waltercook wrote:

    So much for the company management running a company to benefit the stockholders. The only winners were the managers with their bonuses and now the stockholders are paying whole the company executive continue, business as usual. No clawbacks, criminal charges and few terminations. This board is remiss in their responsibilities.

  • Report this Comment On April 27, 2014, at 7:39 PM, Damocles wrote:

    BAC doesn't really exist. One day we will all wake up and there will no longer be any BCA buildings or branches anywhere. But whatever would we do? Go back to sleep, dream and enjoy it.

  • Report this Comment On April 27, 2014, at 11:44 PM, DRAPS0402 wrote:

    Unfortunately CW/B of A has destroyed our lives and those of thousands of others- so much for following Federal Banking Regulations.

    We were part of many of these class action suits and the only reason still in our home is because they did so many illegal things, all of which they know we have actual proof for.

    It is truly sad that the high level execs go on making their millions each year = their M.L. brokers get their bonuses and yet those of us middle class individuals who's identity's were sold by a VP not taken in merger and no one at B of A could care less.

    I recently heard they were looking to borrow more money from Govt to stay afloat - all these lawsuits and their salaries are all that matters to them.

  • Report this Comment On April 28, 2014, at 9:56 AM, spitzerone wrote:

    All this and no one has gone to jail! This could happen only in America.

  • Report this Comment On April 28, 2014, at 8:46 PM, bmyrle wrote:

    I feel like some kind of illiterate idiot commenting on this but for some reason, all your objections to BofA fail to even underscore the wonderful way BofA treats their customers. I have been a member for some 40 years and in all that time with a tiny balance every month I do not get fees charged, get wonderful treatment of any problem and kind and courteous chats. I wouldn't trade them for any other bank in the world!

  • Report this Comment On April 29, 2014, at 2:30 AM, wstr wrote:

    Horrifying what they did with/to not only their customers, but the entire economy as well.

  • Report this Comment On September 20, 2014, at 9:06 AM, 1955 wrote:

    Worst bank in the world. Charging me 2600. per year on flood insurance when I live in a non flood area. I will take them to court in the next few month. Also they lie to you all the time. And I am not spending one dime proving that I live in a non flood area. Since they want the money let them spend the money.

    The burden of prove falls on them.

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