An Example of Bear Sterns’s Conduct?
posted by Frank Pasquale
One might wonder, what type of conduct could decimate an 85 year old bank like Bear Sterns? A recent consumer protection case described by Rebecca Tushnet suggests an answer (though I note for all our non-lawyer readers that a complaint merely alleges, and does not prove, facts like these):
Plaintiffs are suing over allegedly abusive mortgage practices. Plaintiffs speak, read, and write only in Spanish; they were contacted by Yazmin Esparza, who told them she represented a company called Fastlink and promised to consolidate their existing home loans in a mortgage with monthly payments under $2700 and other favorable features. Though plaintiffs told Esparza they wanted a 5-year fixed-rate loan with interest-only payments, and she promised to get it for them, she gave them loan documents to sign that were actually for an adjustable rate mortgage with monthly payments of nearly $3400, as well as a second mortgage. These documents were written in English, but Esparza—who knew of plaintiffs’ status as Spanish-only speakers—assured them that the documents reflected their requests. Plaintiffs signed. Bear Sterns was the lender, and the complaint alleged that Bear Sterns paid Esparza and Fastlink nearly $7400 as an incentive for switching plaintiffs to the more expensive loan.
To the extent this type of conduct was widespread, we need to seriously consider state laws like the New Jersey Home Ownership Security Act of 2002. Analyzed in this article by Baher Azmy and David Reiss, the Act at least attempted to resolve the “inherent tension between increasing consumer protections and preserving vibrant consumer credit markets.”
March 18, 2008 at 8:42 pm
Posted in: Corporate Law
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Responses (3)
Jack S. - March 19, 2008 at 6:50 am
Perhaps out of this we’ll have some new cases in the next edition of contracts casebooks to rehash the unconscionability doctrine.
KipEsquire - March 19, 2008 at 10:21 am
You left out the part about how BSC won the MSJ:
First rule of law school: never rely on just the headnotes.
Frank - March 19, 2008 at 10:29 am
So Kip, how about that article on the NJ Homeowners’ protection act? Or are you just too eager to absolve Bear to actually bother to consider a measured analysis of a potential solutions to problems like these? Also, what do you think of the judge’s views on the “outrage” claim, which survived this stage of the lawsuit?
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