Bank of America hit with $45 million punitive damages award for violating automatic stay provision of Bankruptcy Code: ECMC take notice!

A few days ago, Judge Christopher Klein, a California bankruptcy judge, struck a breathtaking blow for justice when he assessed $45 million in punitive damages against Bank of America for violating the automatic-stay provision of the Bankruptcy Code. You may recall that a Texas bankruptcy judge hit Educational Credit Management Corporation with a $74,000 punitive damages award for the same offense.

Here are the opening words of Judge Klein's Bank of America decision:

Frank Kafka lives. This automatic stay violation case reveals that he works at Bank of America. 

The mirage of promised mortgage modification lured [Erick and Renee Sundquist] into a kafkaesque nightmare of stay-violating foreclosure and unlawful detainer, tardy foreclosure rescission kept secret for months, home looted while the debtors were dispossessed, emotional distress, lost income, apparent heart attack, suicide attempt, and post-traumatic stress disorder for all of which Bank of America disclaims responsibility. 

Judge Klein then detailed Bank of America's offenses in detail--his opinion is 107 pages long! And at the end, Judge Klein spelled out how the punitive damages award should be apportioned:

The actual . . . damages are $1,074,581.50. The appropriate . . . punitive damages are $45,000,000.00.
The Sundquists are enjoined to deliver $40,000,000 (minus applicable taxes) to public service entities that are important in education in consumer law and deliver of legal services to consumers: National Consumer Law Center ($10,000,000.00), National Consumer Bankruptcy Rights Center ($10,000,000.00), and the five public law schools of the University of California System ($4,000,000.00).

Of course, Bank of America will appeal Judge Klein's punitive damages award, and who knows how that will go. But regardless of what happens on appeal, Judge Klein has turned a glaring spotlight on Bank of America's outrageous behavior.

And if the damages award is upheld, money will flow to entities that can help distressed debtors fight the predatory tactics of the banks.  That would be a great blessing for American society.

And this brings me to Educational Credit Management Corporation, the predatory student-loan debt collector that violated the automatic stay provision of the Bankruptcy Code more than 30 times by repeatedly garnishing the wages of Kristin Bruner-Halteman, a student-loan debtor who worked for Starbucks.  In a 2016 decision, Judge Harlin DeWayne Hale, a Texas bankruptcy judge, awarded Bruner-Halteman $74,000 in punitive damages for ECMC's misbehavior.

But $74,000 is a pittance for ECMC; it probably has that much cash in loose change that slipped under its couch cushions.  According to a report by the Century Foundation, ECMC has $1 billion in unrestricted assets. That's billion with a B.

So--listen up distressed student-loan debtors. If you file for bankruptcy in  a case opposed by ECMC and ECMC violates the Bankruptcy Code's automatic stay provision as it did in the Bruner-Halteman case, you need to ask for several million dollars in punitive damages. How about $10 million--that's only one percent of ECMC's assets.

References

Bruner-Halteman v. Educational Credit Management Corporation, Case No. 12-324-HDH-13, ADV. No. 14-03041 (Bankr. N.D. Tex. 2016).

Robert Shireman and Tariq Habash. Have Student Loan Guaranty Agencies Lost Their Way? The Century Foundation, September 29, 2016. Accessible at https://tcf.org/content/report/student-loan-guaranty-agencies-lost-way/

Sundquist v. Bank of America,  Adv. Pro. No. 204-0228, Case No. 10-35624-B-13J (Bankr. E.D. Calif. March 23, 2017).

Say it ain't so, Joe! Penn State coach Joe Paterno was in bed with Bank of America

According to a story in the Pittsburgh Post-Gazette, Penn State football coach Joe Paterno--Penn State's beloved "Joe Papa"--signed two $100,000 contracts to promote Bank of America products and sign some football helmets and footballs.

Jerry Sandusky and Joe Paterno
Photo credit: Paul Vathis/Associated Press

Apparently, Joe's $13 million pension, his access to a private jet, and his million dollar salary were not enough for him.  He had to sign on as a shill for Bank of America. No wonder he didn't spot Jerry Sandusky seducing little boys in the Penn State locker room.  Joe was too busy autographing footballs.

And the alumni association for Penn State University, Joe Papa's employer, also had a special deal with Bank of America. According to the same Pittsburgh Post-Gazette story, Penn State received more than $2.7 million in fees and royalties  from a deal to help a Bank of America subsidiary market high-interest credit cards to Penn State students and alumni.

Penn State's alumni association received a "1 percent kickback royalty" on retail purchases made by Penn State alumni on the Penn-State branded card and the association got 0.5 percent of purchases made by Penn State students.

Of course, both deals were confidential. We would not know about them were it not for a 2009 federal law that requires colleges and universities to file copies of their agreements with credit card companies with the Consumer Financial Protection Bureau. At one time, more than a thousand colleges and universities had deals with credit card companies. Today that number has dropped to about 600.

According to the Consumer Financial Protection Bureau, some universities made millions on these deals, but others got very little.  The University of St. Thomas, a Catholic university in Houston, Texas, only made $2,365 on its credit card deal in 2012. Why sell your soul for peanuts?

The Pittsburgh Post-Gazette story is another indication of the corporatization of American colleges and universities. Instead of focusing on their mission, which is to provide students with a high-quality education at a reasonable price, they wandered into the banking business, taking kickbacks from credit card companies in return from helping them peddle high-interest credit cards to college students.

This tawdry tale provides yet another reason for a federal open-records law that would require all colleges and universities that receive federal student-aid money to make all their records available to the public.

References

Associated Press. Joe Paterno earned $13.4M pension.  ESPN College Football, May 22, 2012. Accessible at: http://espn.go.com/college-football/story/_/id/7959425/joe-paterno-earned-134m-pension-penn-state-nittany-lions

Jo Becker. Joe Paterno Won Sweeter Deal Even as Scandal Played Out. New York Times, July 14, 2012. Accessible at: http://www.nytimes.com/2012/07/14/sports/ncaafootball/joe-paterno-got-richer-contract-amid-jerry-sandusky-inquiry.html?_r=0

Consumer Financial Protection Bureau. College Credit Card Agreements. Accessible at: http://www.consumerfinance.gov/credit-cards/college-agreements/

Tim Grant. Penn State leads U.S. in earnings from collected credit card royalties. Pittsburgh Post-Gazette.com, January 11, 2013.  Accessible at: