Three weeks ago, checks released to homeowners as compensation for foreclosure abuses were rejected because of insufficient funds. This week, the consulting firm made another error with the checks once again. The amounts written on them were wrong.
According to officials who have knowledge on the matter, Rust Consulting issued around 100,000 checks for less than what the homeowners were owed. The error have cheated consumers out of millions of dollars they were set to receive under the deal that was reached between the nation’s largest banks and the government.
Federal regulators urged Rust Consulting to amend its mistake. Rust said that it had already made the necessary corrections and planned to mail supplemental checks to borrowers who were affected by the error. The firm said it was due to a clerical error.
The issue placed the spotlight on Rust, which was chosen as the distributor of checks for the settlement worth $3.6 billion that regulators signed with the banks. The problems plaguing Rust also raised questions about the government’s supervision of the firm and the wisdom of hiring it for the job.
Homeowners complained that the problem is bigger than Rust has acknowledged. The issue alarmed Capitol Hill and led to the investigations on the settlement. Democratic Representative Elijah E. Cummings of Maryland said that it was the worst settlement he has seen in his life. He has opened a probe into the problems with the settlement, which included the use of Rust.
Rust has been the favored in-between firm for class-action lawsuits and government settlements. It has more than 50 federal contracts and its own political action committee that has made campaign donations across Washington.
In the foreclosure settlement case, regulators accused 13 lenders of wrongful evictions. Rust was seemed to be the most logical choice. Regulators balked when some banks suggested other consulting firms. It was regulators who suggested that banks use Rust.