JPMorgan will pay $136 million — $11 million more than had been initially anticipated — to settle U.S. state and federal probes into the bank’s practices around the buying and selling of consumer credit card debt.
About $50 million of that amount has been earmarked for restitution, according to sources familiar with the matter.
The settlement stems from accusations that the bank excessively tapped into “robo-signing” and other discredited methods of collection against consumers who may or may not have actually owed any money. Robo-signing refers to signing documents in mass quantities without review. The nation’s biggest bank was also accused of providing inaccurate information to debt buyers.
“There has to be one set of rules for everyone, no matter how rich or how powerful, and that includes the biggest multi-national financial institutions,” New York State Attorney General Schneiderman said in a news release. “Chase’s consumer credit card debt collection practices were harmful to families when it pursued collections cases based on false and outdated information. In some cases the listed debt was the wrong amount, was associated with the wrong person, had previously been discharged, or was a time barred or very old ‘zombie’ debt.”
Under the terms of the agreement, Chase will have to "significantly reform its credit card debt collection practices in areas of declarations, collections litigation, debt sales and debt buying," the state's attorney office said. the company will also to have to add additional safeguard to "significantly reform its credit card debt collection practices in areas of declarations, collections litigation, debt sales and debt buying."
Another significant part of the agreement requires that Chase ends its collection efforts on more than 528,000 consumers.
According to the investigation: "Chase suspended its consumer credit card debt sales in 2013 and collections litigation in 2011. In 2012 Chase maintained approximately 64.5 million open accounts with $124 billion in outstanding credit card debt. From 2009-2013, Chase recovered approximately $4.5 billion of debt from defaulted accounts through collection lawsuits, selling defaulted accounts to third-party debt buyers, or both."
According to the joint state-federal probe investigation, Chase committed the following unlawful debt collection practices
- Subjected consumers to collections activity for accounts that were not theirs, in amounts that were incorrect or uncollectable.
- Subjected consumers to inaccurate credit reporting and unlawful judgments that may affect consumers’ ability to obtain credit, employment, housing and insurance in the future.
- Sold certain accounts to debt buyers that were inaccurate, settled, discharged in bankruptcy, not owed by the consumer, or otherwise uncollectable.
- Filed lawsuits and obtained judgments against consumers using false and deceptive affidavits and other documents that were prepared without following required procedures. These practices misled consumers and courts and caused consumers to pay false or incorrect debt and incur legal expenses and court fees to defend against invalid or excessive claims.
- Made calculation errors when filing debt collection lawsuits that sometimes resulted in judgments against consumers for incorrect amounts.
The U.S. Consumer Financial Protection Bureau (CFPB), all but three states and the District of Columbia are expected to announce settlements in the near future, possibly as soon as sometime later today (July 8). Of the money, the states will split up $95 million while the CFPB will grab $30 million.
Iowa Attorney General Tom Miller, who has been leading the state level crusade against JPMorgan’s debt sales and collection actions, had no comment. Mississippi and California likely won’t settle at the same time, sources said. Both have lawsuits pending against JPMorgan over debt collection practices. The Mississippi lawsuit said employees described a “chaotic” and “disorganized” workplace marred by “rampant” mistakes, inadequate training, constantly changing policies, high turnover and unrealistic quotas.
California Attorney General Kamala Harris sued in 2013 on behalf of the 100,000 California credit card borrowers that she says were the victims of JPMC’s tactics. California also claims the bank flooded state courts with questionable lawsuits, filing thousands every month — with the one-day record being 469 lawsuits.
This is not JPMC’s first tangle with this issue. In 2013, the CFPB ordered JPMC to refund $309 million to about 2 million customers who were impacted by the bank's illegal credit card practices, which included charging consumers for credit card monitoring services they did not receive. Around that same time, the Office of the Comptroller of the Currency also issued a consent order — which demanded changes, including to debt sales — against JPMorgan after the office identified unsound practices related to the bank’s sworn document and collections litigation.
In 2013 they did note that collection issues affected less than 1 percent of customers, and that it stopped filing collection lawsuits in 2011 and stopped enrolling customers in credit monitoring services in 2012. As for the current situation, JPMorgan has not yet offered any public comment.