On April 25, 2017, the Office of the Comptroller of the Currency (the “OCC”) published a decision that orders U.S. Bank National Association to pay a civil penalty of $15 million for bankruptcy filing violations. According to the OCC, the Bank committed various errors related to the requirements under Bankruptcy Rule 3002.1 including: untimely, not filed, or inaccurately filed Proofs of Claim; (b) payment application inaccuracies resulting in overpayments by debtors or trustees; (c) untimely and/or inaccurate Payment Change Notices; (d) untimely, and/or inaccurate Post-Petition Mortgage Fees, Expenses, and Charges; (e) inaccurate Notices of Final Cure; (f) exposure of confidential customer information in court-filed documents; and (g) inconsistent application of the Bank’s fee waiver practices.
Rule 3002.1 requires secured lenders in Chapter 13 bankruptcy proceedings to comply with several time sensitive notices reporting changes in payments, post-petition fees and responses to the Chapter 13 Trustee’s notice of final cure. Failure to comply with Rule 3002.1 may result in severe penalty, damages, and fines.
This decision represents a trend in decisions revolving around Rule 3002.1 violations. In November 2015, a settlement agreement was entered into in the District of Maryland between the United States Trustee Program and Wells Fargo after the United States Trustee identified over 84,000 accounts for which a notice of mortgage was either missed or untimely.
More recently, in September 2016, a decision was released out of the Bankruptcy District Court of Vermont which opened the door to Rule 3002.1 sanctions. In this case, the Rule 3002.1 violations resulted in a $375,000 sanction. More importantly, this case represents the first instance of punitive sanctions under Rule 3002.1.
We recommend that secured lenders reach out to legal counsel to evaluate current processes and determine best practices to avoid or mitigate liability. If you have questions regarding the impact of these decisions or complying with the requirement under Bankruptcy Rule 3002.1, please contact ZBS Law, LLP.
Erin M. McCartney, Managing Bankruptcy Attorney
In re Gravel, 556 B.R. 561 (Bankr. D. Vt. 2016).