BLOG VIEW: Over the past month, MortgageOrb has reported on two major cases where active duty personnel and military veterans have been the subject of inappropriate actions by a pair of major lenders. I would like to imagine that these were just isolated cases, but evidence would suggest this is part of a wider problem.
Last week, MortgageOrb highlighted the news that Wells Fargo was going to provide $10 million in refunds to approximately 60,000 military borrowers who were inappropriately charged fees when they sought to refinance their mortgages. This decision resulted from the settlement of a class-action lawsuit filed against the lender in the State Court of Troup County, Ga.
Earlier in the month, MortgageOrb followed JPMorgan Chase's unfolding admission that it overcharged 4,500 military borrowers and wrongfully foreclosed on 18 military families. The discovery of that lender's actions was also brought to light as a result of a lawsuit filed by an aggrieved military borrower.
In both cases, the lenders in question apologized profusely for their actions. Clearly, being presented in the media as a corporation that routinely cheats military personnel and veterans is not the kind of publicity that will win new customers. Chase was also called before a congressional inquiry to explain what went wrong.
But this is not a situation that is unique to mortgage banking, nor is it something that just popped up. The payday-lending industry, it seems, has done far more damage to the financial well-being of military service personnel. In October 2006, I wrote an E-Feature for Secondary Marketing Executive that detailed how the U.S. Department of Defense (DoD) attempted to put a stop to all payday-lending activities concentrated around military bases. The payday lenders, who targeted financially strapped individuals with atrociously high interest rates on short-term loans, were creating a catastrophe by wrecking the credit histories of military members. In fact, the DoD discovered an estimated 80% of naval security clearance revocations and denials were due solely to individual financial issues.
This situation has not escaped the attention of the still-forming Consumer Financial Protection Bureau, which is establishing the Office of Servicemember Affairs to address this concern. Holly Petraeus, former head of the Better Business Bureau's military division and wife of Gen. David H. Petraeus, was named to head this new office.
While Petraeus has her work cut out for her, other people apparently did not bother to do their jobs correctly. But this begs the question: Where were the watchdogs from the DoD, the Department of Veterans' Affairs, the Department of Housing and Urban Development and the Department of the Treasury while thousands of veterans and active-duty personnel were being ripped off? The Wells Fargo and JPMorgan Chase admissions of error did not come from a government inquiry – the individual borrowers had to go through the stress and expense of civil court cases, which eventually brought media attention and a congressional inquiry to the controversy.
I sincerely hope that the Wells Fargo and JPMorgan Chase episodes represent aberrations, but my inner pessimist believes that another awful financial news story involving the abuse of military personnel is going to pop up in the near future. Truly, this is one story that I would prefer never having to discuss again.
– Phil Hall, editor, Secondary Marketing Executive
(Please address all comments regarding this opinion column to hallp@sme-online.com.)
