Bank of America to Pay $108 Million Settlement
June 7, 2010Bank of America will pay $108 million to settle federal charges that Countrywide Financial Corp., which it acquired nearly two years ago, collected outsized fees from about 200,000 borrowers facing foreclosure.
The Federal Trade Commission announced the settlement Monday and said the money will be used to reimburse borrowers.
Bank of America purchased Countrywide in July 2008. FTC officials emphasized the actions in the case took place before the acquisition.
Bank of America said it agreed to the settlement "to avoid the expense and distraction associated with litigating the case," which also resolves litigation by bankruptcy trustees. "The settlement allows us to put all of these matters behind us," the company said.
Countrywide hit the borrowers who were behind on their mortgages with fees of several thousand dollars at times, the FTC said. The fees were for services like property inspections and landscaping.
Countrywide created subsidiaries to hire vendors, which marked up the price for such services, the FTC said. The company "earned substantial profits by funneling default-related services through subsidiaries that it created solely to generate revenue," the agency said in a news release.
The agency also alleged that Countrywide made false claims to borrowers in bankruptcy about the amount owed or the size of their loans and failed to tell those borrowers about fees or other charges.
(Copyright 2010 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)