Heritage Pacific Financial, a debt buyer of foreclosed second mortgages, first popped up on my radar screen nearly two years ago. At that time Heritage was filing multi-defendent complaints in state and federal courts against California home loan borrowers–mostly Latino–claiming that the borrowers fraudulently misstated their monthly income on their loan applications. I suspect that they were trying to get people to settle with them and save filing fees, but at least most federal district court judges recognized that suing multiple defendants on multiple contracts in the same complaint is not proper under the Rule 20 of the Federal Rules of Civil Procedure. (See Order here). As a result, those cases didn’t go very far in court. With the multi-defendant model out the door, Heritage turned its attention to bringing non-dischargeability actions against bankruptcy debtors. Court documents show debtors, many chapter 7 pro se debtors, entering into settlement agreements to pay Heritage thousands of dollars over several years. Sadly, in many of these cases, the underlying debt is uncollectable based on state anti-deficiency laws, Heritage cannot show that is has been assigned the original lender’s fraud claim, or Heritage is unable to demonstrate that the borrower made any false statements or that the original lender relied on any false statement.
Several cases are now pending against Heritage in state courts alleging violations of California’s anti-deficiency laws, the Fair Debt Collection Practices Act, the Rosenthal Act (the state’s version of FDCPA) and state unlawful business practices law.
Earlier this week, Rick Jurgens of Center for Investigative Reporting, wrote a story that focuses on some of the borrowers that have been targeted by Heritage. ABC affiliate, KGO-TV, in conjunction with CIR, also put together a video news story on Heritage.
NCBRC is looking into Heritage’s practice of bringing frivolous non-dischargeability actions in bankruptcy courts throughout California. The United States Trustee should also consider a thorough investigation of Heritage and its bankruptcy practices.
Tags: dischargeability
