SunTrust HELOC, ERISA…RUOK?

September 10th, 2009. By AbiK

SunTrust bank’s been popping up in the news—and in chat rooms lately. Granted, in the chat rooms there’s a lot of griping about NSF’s, fees that seem to appear out of nowhere, trouble with closing accounts…and on and on. They’re the beefs we all have with big banks. SunTrust is also in the news this week as authorities continue to look for the guy who cashed close to $9,000 in fraudulent checks last summer at some SunTrust banks in Maryland.

But the bigger issues with SunTrust right now are lawsuits it may be facing in regard to its HELOC (Home Equity Line of Credit) loans and allegations that it may have breached its fiduciary duty under ERISA.

First, the SunTrust HELOC…

SunTrust is not alone when it comes to having frozen or stopped HELOC accounts. The difference here—which LawyersAndSettlements has been reporting on—is that there was allegedly no real “heads up” given to SunTrust clients who received letters informing them that their HELOC loans were frozen—and worse yet, no explanation or clear grounds for doing so. From reports to date, folks who were affected by the freeze-out were on time with loan payments, never in arrears, and good doobies—the ones banks typically fawn over. Another twist to the SunTrust HELOC situation is that in true pull-at-the-heartstrings fashion, it’s alleged that many of the affected parties were those who were most vulnerable, such as the elderly.

The motivation for why SunTrust froze the HELOC accounts is of course in question and at the root of the allegations. The claimants are charging that SunTrust acted to avoid the HELOC’s having a negative impact on its liquidity thereby allowing them to show a healthier capital ratio. Pretty self-serving…

Then, the SunTrust ERISA…

There’s an investigation underway regarding SunTrust’s possible breach of fiduciary duty for current and former employees under ERISA. Back in March 2009, an investor in SunTrust (NYSE:STI) filed a proposed securities class action suit alleging violations of Federal Securities Laws. At the heart of the allegations is the charge that SunTrust provided false and misleading statements regarding its financial results and condition. The lawsuit covers the period for current and former employees who had purchased or held SunTrust stock between July 22, 2008 and January 21, 2009.

Oh, and RUOK?

What’s most at issue though with both the SunTrust HELOC and SunTrust ERISA charges is that, particularly with the economic downturn and many individuals facing difficult financial challenges, people relied on SunTrust for income—whether that income was needed in the here and now or it was the basis of a retirement nest egg. It was security. And that security has vanished. And that has left a lot of folks not OK.

Tags: SunTrust

This was posted on Thursday, September 10th, 2009 at 11:54 am and is filed under Emerging Issues . Feel free to respond, or trackback. Read our comments policy.