An Oklahoma husband and wife allege in a proposed class action that Bank of America, N.A. (BoA) has improperly required and overcharged for force-placed flood insurance.
According to the 25-page suit, BoA has engaged in a pattern and practice of forcing customers to buy and/or maintain flood insurance in excess of what’s required by federal law. Per the case, BoA requires certain customers purchase and/or maintain flood insurance in amounts greater than the bank’s secured interest in the property and contrary to amounts agreed upon in relevant loan and mortgage documents.
The lawsuit alleges BoA’s force-placed flood insurance conduct violates the Truth in Lending Act and Real Estate Settlement Procedures Act. The plaintiffs claim BoA ties insurance products in with its mortgage loan and home equity financing activities in “an arbitrary fashion” and with no regard to whether borrowers even need flood insurance.
Bank of America force-places flood insurance on customers by sending letters claiming that the individuals do not have adequate flood insurance, the suit claims, adding that these letters are mailed regardless of whether adequate coverage is already in place or even required for a particular property. In the event a borrower sends proof to BoA that they have adequate coverage or, alternatively, do not require it, the defendant “disregards such information and force-places high premium flood insurance policies” amid a “pattern and practice of mailing a barrage of harassing letters and placing repeated harassing telephone calls,” the complaint alleges.
Moreover, BoA, throughout this process, misrepresents that its requirement that borrowers secure additional flood insurance at their own expense is mandated by federal law for those who own property in “special flood hazard areas,” the suit claims. In all, BoA forces borrowers to pay for excessively priced flood insurance policies through companies affiliated with the bank, the lawsuit says, and gave or accepted “unlawful kickbacks, referral fees, commissions, or other compensation” on the transactions.
“BOA’s affiliates charge excessively high insurance premiums above what an independent company would charge, in Plaintiffs’ case almost exactly double what State Farm charged for the same coverage, even though those insurance policies are, as described in BOA”s letters to Plaintiffs, limited compared with independently written insurance policies,” the suit reads.
According to the plaintiffs, there exists “no reasonable or good faith explanation” for BoA force-placing flood insurance outside of the bank’s own financial interests. Further, the bank has allegedly force-placed flood insurance, withdrawing payment for such directly from borrower’s escrow accounts or adding to their mortgage balance, without clearly and adequately disclosing the insurance’s terms and requirements.
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