

Profile of a New York judge who is 'sticking it' to bankers who mess up - grellas
http://www.law.com/jsp/article.jsp?id=1202463642417&LowKey_Judge_Raises_the_Roof_With_Foreclosure_Rulings

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anigbrowl
It's mysterious to me how easily banks win most of these cases by default - I
guess people who are underwater with their mortgages are often either afraid
to show up in court or don't have the money to hire a lawyer to challenge
their foreclosure. Perhaps because of this, debt-related legal cases typically
seem to proceed in an almost assembly-line fashion, eg
<http://www.nytimes.com/2010/07/13/business/13collection.html>

The perception that banks in particular are too big to fight legally has
(IMHO) resulted in their legal departments becoming terribly sloppy, selecting
policies and even litigation strategies purely on the basis of whether they
will be beneficial rather than defensible. Hence the contractual Terms &
Conditions for a checking account or credit card which now run to many tens of
pages, require graduate-level reading ability, and rival software licenses for
the boldness of their asserted rights. A recent case I've been cackling over
is Wells Fargo's attempted defense of their transaction-ordering policies
(<http://www.law.com/jsp/ca/PubArticleCA.jsp?id=1202463467062>).

Like most retail banks, WF had adopted a policy of re-ordering customer
transactions made on a given day so as to maximize the likelihood of customers
incurring multiple expensive overdraft fees. Say a customer living paycheck-
to-paycheck (about 60% of the population) had a balance of $20 in their
checking account; they made 3 debit transactions of $5 each in the morning,
deposited $30 at lunchtime, and made one further purchase for $35 in the
afternoon. Logically, you'd expect the resulting balance to be $20, $15, $10,
$5, $35, $0. Instead, the bank would reorder the day's transactions from
largest to smallest, yielding $20, $-15, $-50 (due to overdraft fee), $-20,
$-25, $-60 (fee), $-65, $-100 (fee), $-105, $-140 (fee). Cha-ching!

This happened to me (at another bank) some years ago following an unlucky
combination of bad cash flow and medical emergency, and I was very upset
because I had gone to the trouble of calling them first and asking if my
planned withdrawal/deposit/withdrawal sequence would be OK. I was told that it
would, only to find myself substantially in the red 24 hours later. I was able
to get it reversed by going to the branch and literally refusing to accept the
telephone handset (to their customer service department) from the branch
manager, so that she and I ended up talking with the call center on
speakerphone...for over an hour. After multiple instances of Central
contradicting themselves or flat-out lying before finally admitting that they
ordered transactions chronologically for online banking and posted them
instantly, but retroactively re-ordered them for accounting purposes at close
of business every day, the manager finally took over and split the refund fees
with Central. Since they record all these calls, my objective had been to get
this admission in the presence of a local bank officer who could then be
called as a witness in small claims court, and I think she realized what I was
doing.

Afterwards she explained to me that not only had the bank (and most others)
seen the fee profit potential when adopting this policy, but had restructured
the company so that the branch network was a separate wholly-owned subsidiary
which earned fixed commissions on the sale of financial products (like
mortgages or CDs that many people prefer to go into the branch for), out of
which all operation expenses were paid. Fee and interest income went on the
corporate books, while fee reversals or the administrative costs of defaults
were assigned to the Branch Operations subsidiary. This didn't just affect
customers. Whereas a decade before employees could begin as tellers and move
up to local, regional and eventually corporate management roles, now the
branches are not much better than franchise operations and the likelihood of a
branch employee ever getting into the 'banking' (financial) division is
practically nil. Local operations exist mainly for marketing purpose and any
exercise of autonomy by branch managers is evaluated purely in terms of cost;
they have zero input into policy, business development, or budgets and as a
result are increasingly less able to offer any kind of useful financial advice
to their clients.

~~~
quesera
I once asked a bank rep how this worked, and was told that at the end-of-day
settlement, all deposits and credits to the account are processed first, then
debits and withdrawals.

I believe the bank was Wachovia (now Wells), but it might have been BofA. I
assumed then that it was an industry-wide customer-friendly standard, but
maybe policies vary?

~~~
anigbrowl
Well, it does seem to have been industry-wide. Customer-friendly, not so much
:-)

Seriously, what you describe is how the policies have often been articulated,
but how they have been implemented depends on exactly how you define
'processed' - which may not necessarily mean 'applied to your account
balance.' I don't want to extrapolate too much from my own experience (which
is only one case, and recalled from >2 years ago at that), but the turning
point came when I observed that debit/withdrawal times were consistently
described in terms of a 12 hour clock, with deposits consistently described in
terms of a 24 hour clock. So an outgoing payment took place at '4:30' (pm),
but an incoming deposit took place at '16:15', with the _implication_ that
since 4 < 16, the debit had happened 12 hours earlier than the deposit. I had
receipts and screenshots of my online banking page, so after being given the
same explanation - twice - and professing an air of sudden enlightenment, I
produced the paperwork and asked to go through the list of transactions one
more time but doing them all in the 24-hour format - which led to an abrupt
and total resolution of the argument in my favor.

Draw your own conclusions. My beef was about the retroactive reordering of the
the transactions as listed by online banking from one day to the next, but in
the course of their explanation matters took a distinctly surreal turn.

~~~
quesera
Yeah, that's crazy and disappointing. I'm quite sure that if it's legal and
not just a bizarre error, it's standard practice for all banks in the US.

In my case, I deposited a single large cashier's check (at the teller due to
concern about the process), and then wrote a similarly-large personal check to
someone else, which I'm quite sure they deposited the same day...so I had a
couple of details working in my favor.

Otoh, there are lots of scary stories about checks being credited and then a
week or two later failing to clear and being deducted from accounts. Standard
craigslist warning, etc.

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MaysonL
Here's an example of the kind of sloppiness which this judge, and with some
luck, others like him across the country, is fighting against.

"Countrywide goes Kafka" [http://www.angrybearblog.com/2010/07/countrywide-
goes-kafka-...](http://www.angrybearblog.com/2010/07/countrywide-goes-kafka-
first-person.html)

------
ars
Please don't editorialize the titles.

~~~
techsupporter
I believe he was quoting the article:

But the 12-year veteran of the Suffolk bench has also issued three foreclosure
decisions over the past eight months that have made him the darling of the
tabloids and the Internet for, as the New York Post put it, _sticking it_ to
"ruthless bankers."

~~~
dhimes
Typically I agree with ars, but at least in this case the edit added clarity.

