Two JPMorgan Chase & Co. units have agreed to pay consumers $28 million and change their procedures to settle Federal Trade Commission charges of engaging in unlawful mortgage servicing practices.

Bear Stearns Cos. and its EMC Mortgage Corp. "misrepresented the amounts borrowers owed; charged unauthorized fees, such as late fees, property inspection fees, and loan modification fees; and engaged in unlawful and abusive collection practices," the FTC said Tuesday. (All of this occurred before JPMorgan Chase bought Bear Stearns in May, the agency said.)

The proposed settlement requires approval from the U.S. District Court for the Eastern District of Texas. It would ban Bear or EMC, a servicing unit in Lewisville, Tex., from foreclosing on a homeowner "unless they have reviewed all available records to verify that the consumer is in material default, confirmed that … [the companies] have not subjected the consumer to any illegal practices, and investigated and resolved any consumer disputes," the FTC said.

The settlement also would place "specific limits on property inspection fees even if they are authorized by the contract" and would require Bear and EMC to "institute a data integrity program" for "consumers' loan information," the agency said.

The agency charged Bear Stearns and EMC with violating the Federal Trade Commission Act, the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and the Truth in Lending Act's Regulation Z. An FTC spokesman said the practices "occurred over the course of years during the explosive growth of the mortgage market," and may have affected "tens of thousands" of customers.

During the boom, Bear Stearns was a big buyer and securitizer of subprime and alternative-A loans.

In 2003, Fairbanks Capital Corp. agreed to pay $40 million and change its servicing practices to settle an investigation by the FTC and the Department of Housing and Urban Development. (Fairbanks is now called Select Portfolio Servicing Inc. and is part of Credit Suisse Group.)

A spokeswoman for JPMorgan Chase said the company had no comment.

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