Federal Regulators Widening Probe on Bank Debt Collection Practices

The U.S. Office of the Comptroller of the Currency (OCC) is expanding an investigation into the documentation used by credit card issuers to verify account accuracy before filing debt collection lawsuits or selling the accounts to debt buyers.

The Washington Post, citing four unnamed sources familiar with the probe, reported on the expansion Wednesday. The Post’s sources say the full scope of the investigation is still unclear, but that it is definitely widening.

News of the OCC investigating bank debt collection practices broke last year in a series of articles by American Banker magazine. At the time, the probe was limited to the practices of JPMorgan Chase’s credit card unit. Federal regulators began the investigation after a whistleblower filed a wrongful termination suit against the bank which revealed alleged misrepresentation of information about a portfolio of card debt for sale.

A key focus of the probe is the documentation used to support either lawsuits filed to collect on delinquent accounts or the sale of the account to a third party. Many of the same concerns seen in debt buyer “robo signing” cases are being expressed at the creditor level.

The OCC probe of Chase has already led to actions from state regulators. California Attorney General Kamala Harris this month announced that her office filed an enforcement action against Chase alleging that the bank engaged in fraudulent and unlawful debt-collection practices against tens of thousands of Californians. The allegations in that case largely mirror those related to the OCC probe and actions against debt buyers.

Both Chase and the OCC declined to comment on the Post article. But last year, the bank provided a statement to insideARM.com on the matter: “Following issues raised with mortgage documents, we conducted an internal review across the firm and found other procedural issues. We immediately alerted our regulators and worked to address them. We have since done a number of tests and found that in the overwhelming majority of cases, the amount collected from customers was correct.”

Chase has reportedly pulled back many of its debt collection lawsuits, opting to no longer pursue credit card accounts in court.

The OCC recently has become more involved in debt collection regulation at U.S. banks. The agency participated in an investigation that saw credit card giant American Express pay a $112 million fine last year. Many of the allegation in that case centered around debt collection practices.