State Sues JPMorgan Chase over Credit Card Debt Collections

Friday, May 10, 2013

JPMorgan Chase, one of the banks that forked over $26 billion to the states for mortgage foreclosure irregularities involving bogus documents, has allegedly applied some of the same finely honed techniques to credit card debt collection.

California Attorney General Kamala Harris accused JPMorgan Thursday of operating a “debt collection mill” that abused the California judicial process and around 100,000 credit card holders.

The lawsuit, filed in Los Angeles County Superior Court, alleges that the bank filed thousands of lawsuits each month for three years, between January 2008 and April 2011, to collect soured 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. are also named in the suit.

The state contends in its action that JPMorgan filed its lawsuits “based on patently insufficient evidence—betting that borrowers would lack the resources or legal sophistication to call defendants’ bluff.” One of its alleged tactics was to swear in court that military personnel were not on active duty, without actually checking to see if that was true.

The actions were reminiscent of big bank behavior on mortgage foreclosures, where they used robosignings 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.

Noach Dear, a civil judge in Brooklyn, New York, who handled up to 150 credit card cases a day, told the New York Times, “A vast number of the lawsuits are flawed and most of them can’t prove the individual actually owes the debt.” Some of the lawsuits used fabricated credit card statements, Dear said.

Often, in its haste to win a quick court judgment, JPMorgan allegedly failed to notify credit card holders that they were being sued. The practice, which California’s lawsuit alleges JPMorgan utilized, is called “sewer service.” 

The U.S.Office of the Comptroller of the Currency, a bank regulator, is also preparing to take action against JPMorgan.

The California lawsuit did not make a request for specific damages. JPMorgan—the largest financial holding company in the United States, with $2.4 trillion in assets and $350 billion in excess deposits—has paid $16 billion in fines, settlements and other litigation expenses in just the last four years.  

–Ken Broder


To Learn More:

California Sues JPMorgan Chase over Credit Card Cases (by Jessica Silver-Greenberg, New York Times)

Calif. Sues JPMorgan Chase over Debt Collection (by Don Thompson, Associated Press)

California Accuses JPMorgan Chase of Debt-Collection Abuses (by Andrew Tangel, Los Angeles Times)

JPMorgan Chase Still Going Strong Despite Paying Billions for Long List of Misdeeds (by David Wallechinsky and Noel Brinkerhoff, AllGov)

Attorney General Kamala D. Harris Announces Suit Against JPMorgan Chase for Fraudulent and Unlawful Debt-Collection Practices (California Office of the Attorney General)

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