• {pagename}

News

Banks Under Investigation for Violating Federal Bankruptcy Law 

Last week, the United States Trustee Program filed requests for the issuance of subpoenas seeking documents and testimony from Synchrony Financial (formerly GE Capital).  The Program is following up on allegations first raised in a bankruptcy case pending before Judge Robert D. Drain.

The debtors allege that the bank reported the debtors’ account as charged off and failed to update the trade line after the debt had been sold and the debtor had obtained a discharge.  Judge Drain has indicated that if the allegations are proven the actions may well be criminal.  He is overseeing several cases which will eventually encompass most banks who have sold debt.  

Specifically, the court and the U.S. Trustee Program are focused on allegations that the bank intentionally did not update the trade line of the debtor, in order to enhance the value of consumer accounts in a bulk sale scenario. The evidence is alleged to be clauses in the agreements which speak to payments made on the accounts, well after the discharge.

The debtors complain that when they sought to lease an apartment or obtain a job, they were turned down until they cleared up the credit report; thus, the debtors felt pressured to make payments on discharged debts.

Last Thursday, a story about the investigation was featured on front page of the The New York Times:

Debts Canceled by Bankruptcy Still Mar Consumer Credit Scores

You can also view a copy of the UST pleadings.

As part of our commitment to follow the growing trend of consumer protection actions in bankruptcy cases, AIS General Counsel, Lawrence Friedman, will conduct a webinar to review this case in detail and discuss the possible implications.

Click Here to Register for our upcoming webinar.

 



All Content © 2017 American InfoSource
Captavi - SaaS CMS Platform © 2017