JPMorgan Chase Coughs Up $100 Million to Settle California Credit Card Lawsuit

Tuesday, November 03, 2015

The California Attorney General’s office and JPMorgan Chase agreed to settle a 2013 lawsuit on Monday that accused the bank of running a “debt collection mill” that abused more than 125,000 credit card holders by indiscriminately suing them.

Chase would pay (pdf) $50 million in restitution to consumers nationwide, $10 million of which would go to Californians. The bank would also pay $50 million in penalties and other payments to California, assuming the deal is approved by a judge.  

The lawsuit, filed in Los Angeles County Superior Court, alleged that the bank filed thousands of lawsuits each month for three years, between January 2008 and April 2011, to collect credit card debt. It filed 469 lawsuits in one day alone. The bank achieved the breakneck pace, the suit claims, by not reviewing court documents for accuracy. Chase Bank USA and Chase Bankcard Services Inc. were also named in the suit.

The actions are reminiscent of big bank behavior on mortgage foreclosures, where they used robo-signings to help churn out faulty documents of dubious origin. The banks ended up signing a pact with 49 state attorneys general for $26 billion over claims they illegally seized people’s homes using the questionable material.

The illegally robo-signed sworn documents this time around were used as a basis for suing the 125,000 people plus another 30,000 lawsuits filed by third-parties. As part of the deal, Chase agreed not to do that anymore.

“Chase also made systematic calculation errors regarding the amounts owed, and sold ‘zombie debts’ to third-party debt-collectors that included accounts that were inaccurate, settled, discharged in bankruptcy, not owed, or otherwise not collectable,” the AG’s office said. Chase also agreed not to do that anymore.

The AG also noted: “Chase sent letters to consumers that contained illegal threats and were signed by attorneys who did not review the accuracy of the information, determine if litigation was appropriate, or intend to follow through on some of the threats made, in violation of California’s Rosenthal Fair Debt Collection Practices Act.”

The military received special treatment. “Chase also filed false declarations regarding military service and improperly obtained default judgments against service members on active duty, in violation of the Service members Civil Relief Act and the California Military and Veterans Code,” the AG said. 

In addition to stop doing what they claim to have stopped doing years ago, Chase “is required to permanently stop all attempts to collect, enforce in court, or sell more than 528,000 consumer accounts valued at hundreds of millions of dollars.”

California was not in the group of 47 states covered by a similar settlement with Chase brokered by federal Consumer Financial Protection Bureau.

In that settlement, as in the California one, Chase does not admit to any “liability for the allegations” and the state does not concede that its “claims are not well-founded.” No one will be prosecuted.

–Ken Broder


To Learn More:

California Settles Debt Collection Suit with JPMorgan Chase (by Don Thompson, Associated Press)

Chase to Pay $100 Million over Bad Debt-Collection Practices in California (by James Rufus Koren, Los Angeles Times)

State Sues JPMorgan Chase over Credit Card Debt Collections (by Ken Broder, AllGov California)

JPMorgan Chase Caught “Misrepresenting” Credit Card Collections; Whistleblower Fired (by David Wallechinsky and Noel Brinkerhoff, AllGov)

Settlement with JPMorgan Chase for Unlawful Debt-Collection Practices (Office of the California Attorney General)

Proposed Judgment (Los Angeles County Superior Court) (pdf)

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