American banks that incorrectly foreclosed on U.S. homeowners' properties issued court-ordered rebate cheques to their victims that bounced.
Media reports Thursday suggest an unknown number of Americans received cheques from their mortgage providers this week that when they attempted to cash them, they received error messages saying there were insufficient funds in the account.
The cheques stem back to a settlement in January of this year. In the months and years following the financial crisis, banks improperly foreclosed on the mortgages and homes of millions of Americans.
A January settlement called for 13 major mortgage lenders to pay differing settlements to 4.2 million Americans who were improperly foreclosed upon. The first rebate cheques were issued last week, on April 12, and reports of bounced cheques emerged shortly thereafter.
Media reports suggest the issue is based around one company, Rust Consulting, which is the financial agency designated as the transfer agent to process the refunds. After collecting $3.6 billion worth of rebate money, Rust apparently failed to transfer it into an account at Huntington National Bank, the Ohio-based bank whose name appears on all the cheques.
"We apologize to anyone who experienced problems trying to cash their cheques," James Park, a senior vice-president at Rust, said in a statement. "We are working hard and communicating with the banking regulators, the servicers, and other banks to ensure those issues are not repeated."
The Federal Reserve said on its website Thursday that it had received reports of cheques bouncing, but had been assured that the situation has been resolved.
"The paying agent for [cheques] being sent to borrowers under the Independent Foreclosure Review has assured the Federal Reserve Board that early problems with some cheques have been corrected and that funds are available to cash all [cheques]," the Fed said.
More than 50,000 people have already received and successfully deposited their rebate cheques, the Fed says.