In a new billboard campaign, People”™s United Financial Inc. trumpets its business in a series of punchy slogans, including “168 years. No bailouts.”
“A lawsuit a week!” is one you may not read any time soon ”“ but which also accurately described People”™s United as the calendar flipped to spring.
Following its February acquisition of New York City-based Financial Federal Corp., People”™s United has pulled no punches with delinquent borrowers it inherited in the deal. In March and April, the Bridgeport-based bank filed more than a dozen lawsuits against small- and mid-sized businesses in arrears on their commercial loans to its new Financial Federal division ”“ none in Connecticut ”“ totaling more than $8 million in money owed.
By comparison, People”™s United filed just a single lawsuit over a delinquent loan in its non-Financial Federal business, and that for a relationship dating back 14 years ”“ far more in keeping with its previous slim record of turning to the courts for payback of commercial loans.
Financial Federal focuses on providing lease financing for companies needing construction and transportation equipment. In an April conference call with investment analysts, People”™s United Chief Financial Officer Paul Burner said the bank immediately benefited from higher yields in its loan portfolio as a result of the acquisition.
As the recession hit its nadir, many business experts opined that banks would adopt a lenient attitude toward commercial customers on the ropes, in hopes of avoiding the nightmare scenario of being unable to recover those funds in any bankruptcy or business failure scenario.
If People”™s United is inheriting a litigious stance from Financial Federal in the swooning construction business, it is clear it plans to stand its ground for the time being as a combined company.
What is unclear is whether a sue-first attitude will in time permeate its Northeast franchise, where People”™s United fled to the relative safety of commercial lending as the mortgage crisis hit its peak in 2008 and 2009.
At deadline three months after the merger, Financial Federal still maintained a separate identity and website from People”™s United; similarly, its new parent made no mention of Financial Federal on the initial web page that introduces commercial customers to its suite of products.
A bank spokesman did not immediately return a call to say whether the lawsuits are confined to a small number of Financial Federal borrowers, or whether they are part of a new legal strategy. In its quarterly report filed with the U.S. Securities and Exchange Commission, the bank stated it is not exposed to any legal proceedings that will have a material impact on its results.
That obviously is not the case for some of the businesses People”™s United is taking to court. In court documents, the company has not been shy about making public sordid details of borrowers”™ situations and alleged transgressions. For instance, in a lawsuit filed in mid-April, People”™s United called in two loans to a California-based crane rental company totaling $1.1 million, after the debtor missed payments in March totaling just $28,000. In its lawsuit, People”™s United made clear it felt it had every reason to proceed in court, alleging the debtor had sold off a crane manufactured by Westport-based Terex Corp. without its knowledge or consent, while attempting to conceal the transaction in violation of the loan terms. The owners of the company have since leased other equipment covered under Financial Federal loans under a different business name, People”™s United claims in its lawsuit.
In its newest lawsuit filed last week, People”™s United seeks to recover some $750,000 in loans to a North Carolina business ”“ with interest charged at 18 percent since early December, which it says it is entitled to under the law.
