Bear Stearns Will Pay $28 Million

Financial

Bear Stearns and subsidiary EMC Mortgage on Tuesday agreed to pay $28 million in settlement with the Federal Trade Commission, on charges of defrauding tens of thousands of home loan customers and violating four sets of federal laws.

"The companies violated four different federal laws, "said Frank Dorman, the spokesperson for the FTC. "We hope people in mortgage servicing companies will read this judgment and adhere to the law."

Bear Sterns through its mortgage subsidiary, EMC, has handled 475,000 mortgage loans in the last year.

Apart from misrepresenting the amounts borrowers owed, said the FTC's complaint, the company 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 company also made harassing collection calls, where agents 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 defendants failed to report the dispute to credit reporting agencies, as required by law.

Bear Sterns and EMC 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.

The companies must also hire a qualified and independent group to ensure compliance with the settlement.

Apart for redress to consumers, no fines were imposed.

Bear Steams and EMC Mortgage are represented by Kevin Arquit, from Simpson Thacher & Bartlett.

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Workers’ Compensation Subrogation of Administrative Fees and Costs

When a worker covered by workers’ compensation makes a claim against a third party, the workers’ compensation insurance retains the right to subrogate against any recovery from that third party for all benefits paid to or on behalf of a claimant injured at work. When subrogating for more than basic medical and indemnity benefits, the Texas workers’ compensation subrogation statute provides that “the net amount recovered by a claimant in a third‑party action shall be used to reimburse the carrier for benefits, including medical benefits that have been paid for the compensable injury.” TX Labor Code § 417.002.

In fact, all 50 states provide for similar subrogation. However, none of them precisely outlines which payments or costs paid by a compensation carrier constitute “compensation” and can be recovered. The result is industry-wide confusion and an ongoing debate and argument with claimants’ attorneys over what can and can’t be included in a carrier’s lien for recovery purposes.

In addition to medical expenses, death benefits, funeral costs and/or indemnity benefits for lost wages and loss of earning capacity resulting from a compensable injury, workers’ compensation insurance carriers also expend considerable dollars for case management costs, medical bill audit fees, rehabilitation benefits, nurse case worker fees, and other similar fees. They also incur other expenses in conjunction with the handling and adjusting of workers’ compensation claims. Workers’ compensation carriers typically assert, of course, that, they are entitled to reimbursement for such expenditures when it recovers its workers’ compensation lien. Injured workers and their attorneys disagree.

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