Bank Lawyer's Blog

Bailing Out

As American Banker's Kevin Wack told us today, while the Indian tribes may be suing the New York State banking superintendent (previous post here), the payday lenders working with the tribes are dropping like they've been gut-shot.

Since Aug. 5,...at least nine of the companies have halted operations. Key to the state's effort was a letter it sent to more than 100 banks in which it pressured them to prohibit online lenders from accessing customers' checking accounts.

The banking industry has largely been mum about how it's responded to the regulatory edict, but it appears banks are falling quickly into line.

The regulators have been assisted by Nacha.

[T]he industry-run electronic payments group Nacha sent a letter to banks warning them that authorizing access to customer accounts could violate Nacha rules.

In the letter, Nacha stated that under its rules, "purported authorizations to pay illegal loans that are unenforceable under applicable state law" are not valid.

I got a kick out of the head of NACHA trying to pooh-pooh its influence on banks.

Jan Estep, president and chief executive officer of Nacha, downplayed the importance of its letter to banks. "So primarily what we've been doing is reminding financial institutions of their existing responsibilities relative to due diligence in terms of their customers that they support," she said.

So, primarily, Nacha is pointing a gun at the head of the banks that are working with these payday lenders and growling,"But being this is a .44 Magnum, the most powerful handgun in the world and will blow you head clean off, you've gotta ask yourself a question: 'Do I feel lucky?' Well, do ya, punk?" Yeah, "just a reminder." We get it.

This is the same tactic that we discussed last week in the case of the state of Maryland: turning up the heat on the banks that work with the lenders and process the loan payments from the customers' bank accounts. Without those banks, the lenders can't survive. To most banks, there's a pretty low threshold of acceptable pain where regulatory pressure is concerned. Processing these payments, no matter how much money they are making from the business line, is simply not worth engendering the increased scrutiny and ill-will from the regulators that will come from continuing to do this business, even if the regulators can't prove that it's illegal or, even, unsafe and unsound.

Banking regulators, especially in Blue State America, have decided that payday lending is "not fair," and, therefore, should not be done. They're going first after the low-hanging fruit, that being unlicensed tribal-affiliated lenders who are easier targets than long-time payday lenders who don't make loans in states in which they are not licensed. However, the handwriting is on the wall for the entire industry, and the words spelled out are neither"Peace" nor "Love."

Today, payday lending. Tomorrow?

Tribes vs. New York: Round 2

If New York state banking superintendent Bernard Lawsky thought that the Indian tribes that he is pursuing in an attempt to choke off their Internet payday lending activities in his state were going to meekly come to heel, they quickly disabused him of that notion.

Two Indian tribes on Wednesday sued a New York regulator in an effort to preserve their ability to make online loans to the state’s residents.

The tribes sought an injunction against Benjamin M. Lawsky, superintendent of New York’s Department of Financial Services, in U.S. District Court for the Southern District of New York.

Earlier this month, Mr. Lawsky ordered 35 online and tribal lenders to stop offering “illegal payday loans” in New York, saying they violated a state-imposed cap on interest rates  charged to consumers.

Mr. Lawsky also pressed banks and the group that oversees an electronic payments system to cut off access to those lenders.

The tribes, however, say they don’t need to don’t need to comply with the law of New York or other states because they enjoy sovereign status under federal law.

“The states have no authority to regulate these tribes in a way that limits their sovereign rights,” said David Bernick, a lawyer with Boies Schiller & Flexner LLP, who represents the tribes. “That is a bedrock principle of law.”

The lawsuit was filed by the Otoe-Missouria Tribe, located west of Tulsa, Okla., and the Lac Vieux Desert Band of Lake Superior Chippewa Indians, located near the Wisconsin-Michigan border. The Otoe-Missouria tribe operates American Web Loan Inc and Great Plains Lending LLC and the Lac Vieux tribe operates CastlePayday.com.

“Through a campaign of misrepresentations, threats, and coercion, the State of New York has launched an attack on the plaintiff Tribal Nations’ inherent sovereignty,” the lawsuit reads.

Lawsky should have been prepared for the fact that the tribes are not wimps. They've been waging jihad on the CFPB for some time.

Consumer advocacy spokespersons, predictably, were outraged by the tribes' insistence that tribal law preempts state law. The tribes responded to such outrage with an analogy that I am convinced was not intended to be ironic, but certainly was.

Tribal lenders compare their online lending operations are similar to Indian-run casinos.  They argue that their operations are legal because borrowers who take out loans agree that a tribe’s law, rather than their state’s law, applies to them.

Yes, that's a winning public relations argument: our payday operations are just like gambling. The odds overwhelmingly favor the house and we make money off the losses of thousands of the addicted. That's not exactly their preemption argument, but it might as well be if they insist on continuing to compare taking out a payday loan to letting it all ride on the pass line. Just sayin...

It's interesting that some of the tribes' competitors are backing New York.

Other lenders disagree with this argument. The largest ‘payday’ lenders, which also offer loans online, say they are careful to only offer their loans in states that allow them, and are careful to comply with state regulations.

“Bad actors tarnish the good reputation of regulated lenders who operate within a complete  framework of federal and state regulations,” wrote Jamie Fulmer, a spokesman for Advance America, the largest U.S. payday lender, in an e-mail earlier this month.

Mr. Fulmer said his company, which also runs an online lending operation “does not lend in New York or any state where our services are prohibited.”

"The good reputation." The article doesn't reflect any collapse into hysterical laughter, so I guess he was serious. You don't make loans in New York because, unlike the Indian tribes, you don't have a valid preemtion argument to make. It sounds like sour grapes more than legitimate support for the high road.

At any rate, the tribes are likely to continue this fight. The money at stake is substantial, and as long as there's a chance that the preemption argument might prevail, there's no reason to back off.

More Foreclosure Fees Misconduct?

As we discussed recently, the Colorado Attorney General and, apparently, law enforcement officials in other states, are investigating potentially explosive allegations that foreclosure law firms have been inflating fees for years. The Denver Post's David Migoya has unearthed additionally seedy conduct by foreclosure lawyers in Colorado that's related to Colorado's unique "public trustee" foreclosure process.

At the risk of losing their homes if they didn't, scores of Colorado homeowners struggling to avoid foreclosure in the past year were each forced to pay hundreds of dollars in lawyer charges for phantom court cases against them, a Denver Post investigation has found.

Those charges, which homeowners in the state's largest counties unnecessarily had to pay to bring their property out of the foreclosure process, totaled more than $40,000. The law firms billed the charges to be reimbursed for having filed the lawsuit and posted a legal notice about it, records show.

Although the fees were very real, the cases and the notices were not.

The Post found 126 foreclosures since January 2012 in which homeowners in 11 counties were told by county public trustees to pay the charges associated with the filings or the foreclosure would continue. But, in fact, no foreclosure lawsuit was filed.

The Post also found that the practice has been going on at least since 2006, according to random checks of prior years' District Court and county public-trustee records.

[...]

The charges — sometimes as much as $300 to file or "docket" a case and $150 to post the notice about it — appear on bills that lawyers submitted to public trustees after a homeowner formally requested the amount necessary to stop their foreclosure.

Those bills, called cure statements, detail the expenses lawyers hired by a foreclosing lender say they've paid or incurred, along with their legal fees to handle the case, the amount a homeowner has fallen behind on their mortgage, interest, late fees and the costs of the county public-trustee's office.

Homeowners are instructed to pay the whole amount by a certain date — no partial payments are allowed — if they want the foreclosure process to end. Otherwise, it continues, and they risk losing their home to public auction.

As Migoya points out, Colorado's public trustees, who conduct the foreclosures under that state's foreclosure system, are forbidden by law from questioning the lawyers' cure statements. Instead, the law relies on the integrity of the "officers of the court" to not file false statements of charges. While some of the foreclosure attorneys have alleged that their statements of fees are merely "estimates," the linked article quotes a Denver judge as flatly ruling that they are statements of fact, not opinion. If that's the case, then the "phantom" foreclosure charges are false statements made to the court, and that's serious business.

If these preliminary investigations continue and eventually bear fruit, there are going to be some lawyers in Colorado who are in deep water without a life jacket. I hope they're all strong swimmers.

Too Late To The Party

A couple of months ago, I wrote a post about how "hagglers" hired by banks to help negotiate major technology service agreements might be useful, as long as the banks who used them didn't forget to include other experts in the mix, including legal counsel. Apparently, my readership is extremely small.

I received a telephone call from a community bank CFO not long ago in which he asked me to review a "signature-ready" core servicing agreement with one of the nation's largest technology service providers. I asked him to explain to me what he meant by "signature-ready." He stated that the contract had been negotiated with the assistance of a well-known technology service consulting firm over an extended period of time, that all outstanding issues had been resolved, and that the agreement was ready for signature.

"The why are you calling me?" I inquired.

"Our consultants tell us that regulatory guidelines 'require' that we have the contract reviewed by an attorney, so that's what we need you to do."

"In other words," I replied, "you need a lawyer to 'bless' the agreement but not raise any issues that might delay execution of the agreement."

My interlocutor sounded offended, but not for the reason you might suspect. "There won't be any issues that your review would uncover because, after all, we hired [Insert Name of Consulting Firm Here]. They wouldn't have missed anything."

"Then, hiring me is a useless gesture made solely to check a box on a form and to snooker the regulators into thinking that legal counsel actually had input into the analysis and negotiation of the agreement," I observed, reasonably. "By the way, is [Insert Name of Consulting Firm Here] authorized to practice law in your state? If not, then they couldn't possibly have given you legal advice concerning such matters as the legal enforceability of crucial contract provisions, the legal implications of risk allocation provisions such as warranties, indemnifications, dispute reolution, default triggers and remedies, disclaimers, damages and liability limitations, and the like. Or did they?"

I cut through the ensuing sounds of crickets chirping by telling him that he should have hired us when the first draft hit his inbox. It was too late in the game to give his financial institution much meaningful input, other than point out whatever the consultants might have missed. I told him that the next time he needed someone to sprinkle holy water on a contract, he should call his local parish priest.

If his call was an isolated incident, it would be worthy of a head shake and then consignment to the one-off file. Unfortunately, it's not the first phone call with that scenario that I've received.Those of us who advise financial institutions on technology service agreements have little of value to add when were called in at the eleventh hour and fifty-ninth minute. From sad experience, we can anticipate the hostility of the reaction that will ensue if we point out any inconvenient truths at that late an hour. Usually, they will be rationalized away by business people who are too far in love with the deal to jeopardize its consummation.

There are lawyers out there who will wave a magic wand over your contract and state with conviction "It looks industry standard to me!" For example, the vice-chairman's brother-in-law who does the occasional sublease review and residential loan foreclosure, the guy with the office over the Rexall Drugstore down at the corner of State and Main. You might as well give him a tumble at that point, for all the real benefit you'll derive.

OCC Bulletin 2001-47 states that "at the outset," banks should conduct a risk assessment of third party relationships that "should include the identification of performance criteria, internal controls, reporting needs, and contractual requirements. Internal auditors, compliance officers, and legal counsel could help to analyze the risks associated with the third-party relationship and to establish the necessary control and reporting structures." The Bulletin also lists a number of contractual issues that should be analyzed and addressed, many of which necessarily involve legal expertise.

Calling in legal counsel when your pen is poised above the signature is way too late do provide any actual value.

Banker's Hours

In addition to foreclosing on the wrong houses, tweeting like you're tone deaf, and purloining a parrot named Luke, Bank of America now appears to be working interns to death. Literally.

A student and Bank of America intern dropped dead in London, reportedly after working a string of around-the-clock shifts.

German national Moritz Erhardt, 21, had been an undergraduate exchange student at Michigan’s Ross School of Business from January through May of this year, officials said.

He was found dead Thursday at Claredale House, a student residential facility in East London. Police and bank officials said the death was not suspicious.

[...]

Erhardt’s death brought light to the internship program’s allegedly brutal work hours.

He had worked three consecutive near-24-hour shifts when he was found dead in the shower of his apartment, according to The Independent.

An anonymous poster on Web site the wallstreetoasis.com site said: “He was found dead in the shower by his flatmate. Intern at BAML [Banking of America and Merrill Lynch] who went home at 6am three days in a row.”

One former investment banker told the UK newspaper that Bank of America interns regularly work 14-hours days.

“Interns can regularly clock up to 100 or even 110 hours a week, but people are fully aware that banking is hard work and the company constantly reminds you to manage upwards in order to not overheat,” the banker said.

“This is the first time I’ve heard of something like this happening and banking is a very close culture.”

That guy will never again be able to say that again, will he? Let's hope it's the first and last time we hear about "something like this happening."

And we thought our experiences in big law were insane. Three consecutive 24-hour shifts? For an intern? Whose brilliant idea was that?

Something is seriously out of whack with Wall Street.

And the sun rises in the east.

Beating On Banks To Squeeze Payday Lenders

The war on payday lending has turned from the lenders themselves to the banks that service them. One of the latest battles in this war is being waged by Maryland's commissioner of financial regulation, Mark Kaufman.

These banks provide access to the network that allows online payday lenders to automatically withdraw loan payments from customers' accounts.

The institutions are all outside Maryland and the reach of the state regulator, but Kaufman said his office has turned over the names of eight banks to federal regulators in recent months. These banks know or should know that they are helping process loans that are illegal in Maryland, Kaufman said.

Maryland is not plowing this field alone.

New York's financial regulator, for instance, recently sent letters to 117 banks, asking them what they are doing to stop illegal payday loans from entering that state. Without banks providing access to the Automated Clearing House network, online payday lenders would not be able to debit consumers' accounts, the regulator said.

"This is a new tack that states are taking," said Alex Horowitz, research manager for the Pew Charitable Trusts.

Federal regulators also have been warning banks about online payday loans. The Federal Deposit Insurance Corp. told banks last year to monitor their relationships with third-party payment processors that may be requesting withdrawals from customer accounts on behalf of payday lenders. Ultimately, the FDIC said, the banks could be held liable for any fraudulent activity.

Even Stevie Wonder could see the handwriting on this wall.

Online payday loans typically involve two banks — the borrower's bank and the payday lender's institution.

Kaufman said borrowers' banks have been working with his office to address consumer complaints, closing accounts to stop withdrawals.

But these illegal loans wouldn't have been possible to make in the first place without the help of another bank debiting borrowers' accounts on behalf of the payday lender, Kaufman said.

"They are the entry point into the system," he said. "Without them, none of this works.

Nope, none of this works without them. Therefore, expect the Feds and the states to work together to make sure as much glue as possible is squirted into the cogs of the payday lending machine via making life difficult for the banks. After all, you don't want people borrowing at high rates from lenders that regulators can get at when there are plenty of made men who are happy to supply the cash sub rosa. Their collection practices make even the debt collectors that Commissioner Kaufman complains about in the linked article look like choir boys.

For some reason, Kathleen Murphy, CEO of the Maryland Bankers Association, insists on ending the article on the sour note of personal responsibility.

"At the end of the day, it comes down to the consumer making smart financial choices," she said. "To decide they need an advance on their paycheck at an interest rate of 500 to 600 or 700 percent annually is not a smart financial decision."

No, it's not a smart decision. And it's the job of government to save people from the consequences of their dumb decisions. Why? Because that's the way the Nanny State rolls.

Blowing The Whistle On Foreclosure Lawyers

The Colorado Attorney General's Office has been investigating the major foreclosure law firms in that state for allegedly inflated billing practices. Most of you outside of Colorado may have heard little about it, since, as Housing Wire publisher Paul Jackson points out, the trade press has been strangely silent (other than Paul's Housing Wire). Paul suggests a reason for that silence: "at least one trade media outlet owns their own attorney guild."

Maybe yes, maybe no. Whatever the reason, it is odd that Housing Wire seems to be the only trade press publication that is running with the story.

The investigation centers around allegedly inflated charges for foreclosure costs, such as costs for posting of notices. Here's how Paul explains the issue.

At the core of the investigations, sources tell me, is how foreclosure law firms billed for allowable “costs” in conjunction with the foreclosure – with the lever being loans insured or guaranteed by Fannie Mae, Freddie Mac or the Federal Housing Administration.

While the GSEs set a public and fixed-fee schedule for foreclosures, they also allow law firms to bill for variable, additional reimbursable costs — typically things like process of service or posting and publication of notices, as well as filing fees with the courts. These pass-through costs are typically borne by the law firms and then billed back to their clients as an allowable cost; and in some cases, like filing fees, the fees are set by the court.

But in other cases, the fee structure is much more flexible. And it’s in these reimbursable costs that serious questions are starting to be asked by both Federal and state officials.

Here’s why: it turns out that many of the major law firms responsible for managing foreclosures for the GSEs also have a controlling interest in the ancillary service firms that generate the variable fees that appear as “costs” on the lawyer’s bill. Many law firms either outright own, or their partners have a significant interest in, the company that is posting and publishing notices; or they may own or have an interest in the company that manages process of service, as well.

It's not illegal for a law firm to own such a business, but it is illegal to inflate the "costs" of foreclosures by use of those firms, which is what is alleged to have happened. In one of the press reports that Paul links to (the Denver Post has been following the story as a matter of local interest), a whistleblower in one of the firms has alleged that is exactly what has occurred. The spread of the investigation to other firms indicates that the Colorado AG thinks that the practices may be widespread. According to Paul, Colorado may be the canary in the coal mine.

According to sources I’ve spoken with, similar investigations into foreclosure billing practices are already active in key states on the Eastern seaboard, too, even if the subpoenas haven’t been made public.

If there's substance to these allegations (and the fact that an attorney in one of these firms would risk her career by blowing the whistle gives some initial weight to the allegations), this is going to get very nasty. The law firms likely won't go down without scorching some earth, as the discussion indicates in one of the articles, where the law firm claims that the whistleblower was a "special counsel" to the law firm on the issue and, therefore, cannot divulge confidences of her "client" or breach attorney-client privilege.

If other states also make public similar investigations, maybe the rest of the trade press will begin to report on this, as well. After all, the story has all the elements the average American loves to hate: lenders, foreclosures, and attorneys.

UPDATE 08.19.13: EDITED TO FIX BROKEN LINK TO JACKSON'S BLOG POST.

Cutting To The Core

I said last night that the post I made then on the eminent domain plan of Richmond, California, would be my last until there were further developments in the litigation. I lied.

I received an email from a prominent financial services lawyer who will remain troll-free by remaining anonymous. My correspondent has figured out the economics of the eminent domain plan. His or her email follows in its entirety:

Have I missed something about this scheme?  Where is Richmond going to get all the money to fund this?

If they condemn and take the mortgages for fair market value, I am guessing that they will not turn around and sell them for less than fair market value.  But they will have to pay substantial transaction costs, not the least of which is to their "advisor" Mortgage Resolution Partners.  That money will have to come from somewhere, which presumably means the fine taxpayers of Richmond.  On the other hand, if they sell the mortgages for more than it cost to buy them, doesn't that tend to indicate that they didn't pay fair value for them in the first place?  And doesn't that create a little 5th Amendment problem?

I went to the dubiously named "Fact or Fiction" page of MRP's site to see what they say about it, and here it is.  With the MRP combination of ivory tower thinking and big government philosophy, I don't know why I didn't see this coming, but I didn't:

Fiction: It is not economically possible to cover administrative and capital costs unless the local government pays less than fair value for the loans.

Fact: The local government can cover these costs because the public-private partnership will invest additional money, time and effort to refinance the loans into more valuable, fully documented loans with a far lower probability of default.  In fact, the public-private partnership will be more successful at refinancing the loans then [sic] a private enterprise would be acting alone, without the credibility and participation of the local government and community. This is precisely the same as when a government purchases a farmer's land and develops it into a toll road or an airport. The project can cover its costs (and more) because the toll road or airport produces far more revenue than the farmland.

So there you have it - academia and government will do it better than private industry.  We can all sleep better now.

I know I'll sleep better.

Eminent Domain In The Mortgage Arena Gets A Court Test

I promise that this will be the last of the Richmond, California posts for awhile or until there's another development in the court case, but the example of political hubris merits at least some passing snark.

After writing my last post on the subject, the city was sued (paid subscription required) by some of the largest banks in the country as trustees of mortgage-backed securities trusts owned by the likes of Black Rock, Fannie Mae and Freddie Mac. In other words, entities with the financial resources to burn your house down with legal fees and costs.

The lawsuit alleges that the proposed use of eminent domain is unconstitutional because it benefits a small group of Richmond citizens at the expense of out-of-state investors, violating the law on interstate commerce. The lawsuit also argues that loans aren't being seized for a valid public purpose—a key criterion for a city that invokes eminent domain.

"Mortgage Resolution Partners has led the city of Richmond into an unprecedented use of eminent domain seizure that is unconstitutional, harmful to homeowners and taxpayers, and unfair to millions of individual savers and investors," said John Ertman, a partner at Ropes & Gray in New York.

The concoctors of the scheme, an Ivy League (albeit, the back door to the bargain basement of the Ivy League) university professor and MRP, the gang of ex-Clinton administration sharks who stand to profit well from this scheme, pooh-poohed the lawsuit.

An MRP representative said it was confident its proposal is "entirely within the law." "No investor in any trust will be made worse off by the sale of any loan," said a company spokesman.

[...]

Legal advocates of the eminent-domain plan have said that constitutional challenges aren't likely to hold up in court. The loan strategy wouldn't burden interstate commerce "because it doesn't prevent credit from flowing in any particular way," said Robert Hockett, a Cornell University law professor who advocates for using eminent domain to seize underwater mortgages.

"This is a bluff," said Mr. Hockett. "It's meant to scare city officials into saying, 'Oh, who are we to argue with the big guns.' "

Mr. Hockett isn't footing the legal bills of the city, so his bloviating from the ivory tower might ring hollow to some. Then again, a crackpot Ivy League professor-cum-Cherokee-princess concocted out of whole cloth the idea for another mammoth federal government bureaucracy designed to ensure that consumers too stupid to make their own decisions about financial products were wet-nursed from cradle to grave, and that hare-brained bureau is now "The Law of the Land" (as its creator so inaccurately put it recently). Therefore, never underestimate the damage an intellectual with no business sense can inflict on this country, especially when aided by "liberal" bureaucrats and pols who've sold out to the dark side.

The mayor of Richmond also ejaculated a breath-taking font of bravado.

Gayle McLaughlin, the mayor of Richmond, Calif., says she’s not deterred from moving ahead with the city’s plan to forcibly purchase mortgages from bondholders using the city’s power of eminent domain despite a court challenge and the possibility of additional action by a federal regulator.

“We feel strongly that we’re on legal ground,” she said in an interview with Developments. “We’re not afraid of going into the courtroom. We believe our legal reasoning will prevail.”

As any combat veteran will tell you, only the abysmally stupid or certifiably insane are not afraid of firepower on the other side of the line. One of the commenters to the linked article responded appropriately.

Note to stupid leftist mayor McLaughlin: Your hubris is not a winning legal strategy.

The lack of so many Democrats supporting you should tell you something, but if you want to self-immolate for the sake of ‘making a statement’, I will enjoy the show. Pass the popcorn!

As long as we continue in the smack-talking stage, we'll pass on giving the matter further attention. On the other hand, it will be interesting to see how this plays out. If Richmond wins in court, the next battle is going to be seeing how the federal government forces lenders to loan in Richmond without imposing a risk premium on the loans. I'm sure we can all think of many social engineering solutions to that conundrum, can't we?

Russian Roulette With A Credit Card

For every American credit card holder who feels that he or she has been ripped off by his or her credit card company, you can live vicariously through the exploits of Russian Dimitry Argarkov who, according to the UK's TheTelegraph's Andrew Trotman, scanned the contract into his computer, rewrote it to his liking, sent it back, and his credit card company, without reading the revised version he sent back, signed it. When the credit card company refused to honor the terms they had unwittingly agreed to and attempted to sue him for fees and charges under the terms of the original offer, Argarkov defended on the grounds that he only owed what was due under the agreement he signed. And won.So far.

"The Bank confirmed its agreement to the client's terms and sent him a credit card and a copy of the approved application form," his lawyer Dmitry Mikhalevich told Kommersant. "The opened credit line was unlimited. He could afford to buy an island somewhere in Malaysia, and the bank would have to pay for it by law."

However, Tinkoff [the credit card bank] attempted to close the account due to overdue payments. It sued Mr Argakov for 45,000 rubles for fees and charges that were not in his altered version of the contract.

Earlier this week a Russian judge ruled in Mr Argakov's favour. Tinkoff had signed the contract and was legally bound to it. Mr Argakov was only ordered to pay an outstanding balance of 19,000 rubles (£371).

"They signed the documents without looking. They said what usually their borrowers say in court: 'We have not read it',” said Mr Mikhalevich.

But now Mr Argakov has taken matters one step further. He is suing Tinkoff for 24m rubles for not honouring the contract and breaking the agreement.

Tinkoff has launched its own legal action, accusing Mr Argakov of fraud.

Oleg Tinkov, founder of the bank, tweeted: "Our lawyers think he is going to get not 24m, but really 4 years in prison for fraud. Now it's a matter of principle for @tcsbanktwitter."

I don't know Russian law, so I have no idea how this is going to turn out for Argarkov or Tinkoff, but if this were in an American court applying US law, I'd favor the bank. If Argarkov had marked up the contract so that the changes were obvious, or if he'd brought to the bank's attention the fact that he scanned the agreement into his computer and had altered it, then the subsequent signing of the agreement by the bank might be arguably the assent of the bank to the revised terms. On the other hand, if the agreement is returned looking the same as it did when it was sent, other than the fact that it contains Mr. Argarkov's signature, the bank would not be on notice of the changed terms and, in that case, Mr. Tinkov and his lawyers have a valid point.

Again, I don't know how this is going to come out in a Russian court. I just hope Mr. Argarkov doesn't land in a Gulag.

As to any American consumer thinking of trying the same thing: Think of something else. Attempting to pull a fast one is never a solid financial game plan.