I got a surprise in the mail today - notice of a settlement in a class action lawsuit about Bank of America's flood insurance policies for the years 2008-2013.
I bought my home in 1997 with a loan from Bank of America. A few years later - around 2000 - FEMA created a "special flood hazard area" (SFHA) which included my property, and because I had a Federally-insured home loan I was required to carry flood insurance. For the first few years, my premiums were very modest. But as they climbed, Bank of America's requirement that I carry the maximum coverage available became quite expensive. Starting in 2005 I argued in complaints to the bank that 12 CFR §339.3(a) required insurance coverage only in the lesser of the loan balance and the maximum amount available. Bank of America, however, asserted that they could require me to carry the maximum coverage amount regardless of the loan balance, and wouldn't budge from that position.
The bank said that this language in my loan papers allowed them require any insurance they wanted:
Borrower shall keep the improvements now existing or hereafter erected on the Property insured against loss by... any other hazards, including floods or flooding, for which Lender requires insurance. ... This insurance shall be maintained in the amounts and for the periods that Lender requires. ...
They backed up that threat by saying that if I didn't buy it (for $335 on the open market), they'd buy it for me and charge me $2,087.50!
I filed a complaint with the Comptroller of the Currency, but they declined to intervene.
In 2010, the underwriter for the insurance company finally noticed that my home was in an SFHA and my premium jumped from $335 to $1,555. I paid that, and paid $1,633 in 2011 and 2012, and $1710 in 2013. Late in 2013 when the premium hit $1,820 I paid off my mortgage (even though the rate was only 2.25%) and canceled my flood insurance.
In today's settlement notice, Bank of America agreed to pay $31 million to settle claims for abuses related to flood insurance. Two-thirds of that amount will be divided among people who had exorbitantly overpriced insurance forced on them, and people who (like me) were compelled to buy more insurance than they wished.
I hope to get something out of this personally. But mostly I am discouraged. Bank of America was once a great company with a real consumer focus. A. P. Giannini made retail banking part of the average consumer's life. By building a large branch network, introducing MICR check automation, and developing the modern credit card Bank of America brought great benefits to many people. But in this area, at least, the company seems to have lost its way.
This was one of just two times in recent decades I was treated poorly in a business dispute. The other incident involved PayPal.
I used PayPal to buy a $58 bicycle trunk bag. That and two other items were left at my front door one day. Two of the three items were stolen. (A spray bottle of raccoon repellent was left behind.) One package was purchased with a credit card and delivered by UPS; that vendor immediately shipped a replacement. The other package was purchased with PayPal funded with a checking account and shipped via the US Postal Service. Because USPS delivered the parcel, the vendor refused to offer any replacement and wouldn't budge. The vendor hadn't offered me the option of buying postal insurance - but in any case postal insurance protects the shipper, who pays for it and makes any claims for loss.
I did a little research and learned that under the Uniform Commercial Code, when a merchant sells to another merchant, title passes when the goods are delivered. But when a merchant sells to a consumer, title passes when the consumer "takes possession." On this basis - and also under PayPal's satisfaction guarantee which promises the same benefits as a credit card purchase, I filed a complaint. PayPal denied it.
I sent my complaint along to the Santa Clara County Consumer Protection Unit, part of the District Attorney's office. A few weeks later I got a telephone call from a staff lawyer there who said that she believed that I was in the right legally. She had argued the case on my behalf with PayPal but they refused to budge. She said that I could try in small claims court, but the dollar amount probably didn't justify the time and effort. Surprised and grateful for her help, I thanked her -- and removed my checking account as a PayPal funding source.
To my great surprise, several years later I received notice of a class action suit for cases where PayPal's protections did not match those of credit cards. I filled out the paperwork and to my greater surprise eventually received a check for $86!
So two times I have been frustrated in pursuing modest claims against big businesses and in both cases my arguments were eventually vindicated through class action lawsuits. Perhaps businesses should take my complaints and arguments more seriously - they'd save a lot of money in legal fees and settlements.
We'll see what happens with my new Whirlpool refrigerator, which after three service calls still doesn't get cold.
