Force-Placed Insurance Claim Against BofA, BQE, Settled in Miami
A settlement deal reached in a Miami federal court ended with Bank of American and QBE Insurance Company agreeing to pay nearly $230 million for their dual roles in a kickback scheme that involved inflating the cost of insurance that was forced on homeowners who had defaulted.
Miami foreclosure lawyers know that these force-placed insurance deals plunged many distressed borrowers in Florida even further into debt, in some cases resulting in them losing their homes. This case, Hall v. Bank of America N.A., heard before the U.S. District Court in the Southern District of Florida (Miami), is the latest of several multi-million-dollar deals reached over the issue in the last year.
There is nothing inherently illegal about force-placed insurance per se. Lenders are allowed to take action to protect interest in a given property when a borrower has allowed the homeowner’s insurance to lapse – regardless of the reason.
Forced-place insurance is usually obtained through companies that offer high-risk coverage. The reason is that most other companies won’t touch these cases because they recognize a higher probability of loss. Most of the time, these higher-risk policies are far more expensive.
Even this isn’t necessarily illegal.
The problem arises when the process becomes abusive. Homeowners are grossly over-billed. For several years, numerous banks had managed to place themselves on both sides of the force-placed insurance transaction, in some cases getting back as much as 75 percent of the premium through a “reinsurance agreement.” Of course, when we call it by its true name, it was a kickback scheme.
In the case of Bank of America and QBE, there was a deal between the two firms that the insurance company would provide kickbacks to the bank for referring force-placed policies to the firm. The cost of those kickbacks were then passed on to homeowners who were already struggling.
Federal authorities accused both firms of violation of both state and federal laws. Specifically, they were accused of violating the U.S. Racketeer Influenced and Corrupt Organizations Act.
It’s worth noting that if an individual person violates the RICO Act, he or she can expect to serve several decades behind bars. But of course, no one here will be going to prison; they’re too wealthy for that.
Although this is the latest force-placed insurance settlement, it’s not the largest. Recently, JP Morgan Chase reached a $300 million settlement. Citibank entered a $110 million settlement. And finally, HSBC Bank USA reached a settlement for roughly $32 million. Wells Fargo also reached a settlement, though officials have not disclosed the sum.
The settlement involving Bank of America pertains to customers who were charged for force-placed insurance between early 2008 and February 2014.
The settlement was part of a class action case, which means that those class members who qualify could receive anywhere from a few hundred to several thousand dollars. It likely won’t be near what they were overcharged in the first place.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.