"We believe SunTrust adopted a classic bait-and-switch maneuver when its financial situation began to rapidly deteriorate," Krinsk, who is not directly involved in litigating the case but has knowledge of the details, says. "This resulted in them deploying a scheme intended to limit certain contingent liabilities on their books that required capital reserves. SunTrust pursued pretextual reasons by which they could ostensibly use a suddenly discerned basis to terminate commitments SunTrust would have to honor for secured lines of credit that clients had previously paid for."
Essentially, the allegations contend that SunTrust clients with HELOC accounts had their lines of credit frozen, suspended or decreased to avoid the inchoate commitment having a negative impact on SunTrust's liquidity and ratio of Tier 1 Capital (Tier 1 Capital is an indicator of the financial health of a banking institution).
Krinsk says that because many of the clients who were affected by this are seniors—the plaintiff is an 82-year-old—the change in their HELOC account has had a serious impact on their finances.
According to the complaint, SunTrust, "determined that an easy way to show a healthier capital ratio than what truly existed would be to identify and then exploit the most vulnerable components of society—the elderly, the aging, and the infirm—falsely advising these unprotected and vulnerable individuals. The complaint further states that SunTrust was "contractually prohibited from acting in the manner it did."
"Because every HELOC was secured by a mortgage in the home of the borrower, the borrower was left in a situation where he or she had no viable alternative and was left without the cash flow that was promised," Krinsk says. "This directly affects them, decreasing their quality of life and adding anxiety to their financial situation. It was very upsetting to them and an unnecessary disruption—you don't need additional problems when you're in your late 70s or your 80s."
Further compounding the seeming absence of good faith by SunTrust was that the people who have sought legal help in fact had good credit and made their payments on time and as agreed.
"Every person we've talked to had not only good credit but had never been so much as a day late in making payments that were due in their home equity lines," Krinsk says. "This includes people who were house rich and looking to the HELOC account as a source of liquidity—they were looking to take equity out of their home."
People who were affected by SunTrust's actions would have had a HELOC account with SunTrust and would have received a communication from the company that the HELOC was frozen, suspended or decreased.
Although the lawsuit focuses on Florida, Krinsk says he believes this situation occurred through the entire southeast area where SunTrust operates, including the District of Columbia, Maryland, Georgia, North Carolina, South Carolina and as far west as Arkansas. The lawsuit is currently seeking class action status.
The law firm of San Diego based Finkelstein & Krinsk specializes in investigating and prosecuting large consumer and securities class actions on behalf of private and institutional investors. Finkelstein & Krinsk is a founding member of the National Association of Securities and Commercial Law Attorneys and has been Lead Counsel in numerous securities fraud, shareholder derivative and consumer class action cases.