FLORIDA COURT - BB&T MUST DISCLOSE & CREDIT PAYMENTS FROM FDIC BEFORE IT CAN COLLECT FORMER COLONIAL BANK DEBT

By Chris Qualmann

A recent debt negotiation of mine involved a large commercial loan originally issued by Colonial Bank, and later serviced by BB&T following Colonial's collapse (and BB&T's assumption of its debts and assets) in 2009.

Despite the fact that BB&T purchased the loan at a deep discount - and that it's acquisition was protected, if not fully guaranteed through a "Loss Sharing Agreement" (as well as a separate "Assumption Agreement") with the FDIC - BB&T initially took the position it could (and would) "collect 100% of the indebtedness anyway." 

But the GOOD news is that this position changed significantly in light of a May, 2012 published ruling from the Circuit Court of Hillsborough County, Florida.  In the case of Branch Banking and Trust Company, Successor in interest to Colonial Bank vs. KRAZ, LLC, et al (No. 2010-CA-000304), BB&T filed suit to collect an unpaid $5.2 million debt from a commercial loan originally issued by Colonial.  In it's ruling, the Court made it abundantly clear that before it could collect a penny ... BB&T had an inescapable legal obligation to disclose (and credit the Defendants) with any discounts, payments and reimbursements received by the FDIC. 

Specifically, the Court stated (as shown on Page 5 of the ruling, a copy of which is linked below):

"It is further ORDER AND ADJUDGED that Plaintiff (BB&T) shall, within thirty (30) days of the entry of this Final Judgment, credit the principal of the Note with all payments received by the FDIC concerning this loan ... No payments shall be due from Defendants until Plaintiff credits all such payments it has received against the principal."

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BOTTOM LINE - Anytime a "successor bank" demands payment on a defaulted loan acquired from a failed institution ... it's a certainty that there are many credits, discounts and set-offs to be taken into consideration as a settlement is negotiated.  Many of these set-offs can be determined from review of the websites of the FDIC, SEC, and/or the successor bank itself.

The full text of the 2012 Hillsborough County opinion can be found here:  https://workspaces.acrobat.com/?d=oEfW16KF1Iamkz5N17M2LQ