Antiquated Financial Institution Consumer Bankruptcy Processes Need an Overhaul According to New Bridgeforce Law Paper
Posted on May 11, 2015 3:10pm PDT
Bridgeforce Law, P.C. and Bridgeforce Inc. analyze the challenges and complexities
innate to financial institutions’ handling of consumer bankruptcies
with the joint release of a white paper that outlines an enterprise approach
to close the gap between the product-centric view of financial institutions
and the more holistic view of the bankruptcy courts while minimizing compliance risk.
The new white paper entitled "Shining the Light on Antiquated Consumer
Bankruptcy Processes" highlights how the variances that exist at
the case, jurisdiction and state level in combination with the inherent
vulnerability of bankrupt customers have contributed to growing scrutiny
from the U.S. Trustee Program and Bankruptcy Courts.
“While higher visibility issues such as Consent Orders, Fair Lending,
and SCRA have taken much of the spotlight, consumer bankruptcy has crept
up as a persistent industry challenge” said Brian Reiss, President
of Bridgeforce. “The financial industry has long been playing with
the wrong players on the field with the wrong equipment in this space
and the time to address these challenges is now.”
Key sections of the paper include:
- Ensuring that highly skilled resources, with a mix of legal and operations
backgrounds, are in place to manage the complexities of the Federal Bankruptcy
Code and Rules
- Descriptions of best practices to mitigate common challenges faced across
the industry including automated notification and case updates, required
accounting/payment tracking capabilities and content verification practices,
among others
- Elements of a Centralized Customer-Centric Bankruptcy unit to manage/oversee
the bankruptcy process from notification to discharge or dismissal
Just last month, a $50 million settlement between JPMorgan Chase and the
U.S. Trustee Program further supported the need for ongoing attention
in this segment as Cliff White (USTP Director) stated “This settlement
should signal once again to banks and mortgage servicers that they cannot
continue to flout legal requirements, compromise the integrity of the
bankruptcy system and abuse their customers in financial distress. …
Other servicers should take note that the U.S. Trustee Program will continue
to police their practices and will work to ensure that those who do not
comply with bankruptcy law protections for homeowners will pay a price.”
Financial institutions are facing impending scrutiny surrounding consumer
bankruptcy. Kurt Kline, Managing Partner of Bridgeforce Law, P.C. warns
institutions to “Maintain focus on the fact that people declaring
bankruptcy can be significantly vulnerable and financially distressed,
and errors will not be tolerated by regulators.”