Chase Consent Order Has Broad Impact on Debt Collection Industry

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Don Maurice

Don Maurice

JPMorgan Chase Bank, N.A. and certain of its affiliates Thursday entered into a sweeping consent order with the U.S. Office of the Comptroller of the Currency covering its practices for collecting debt, as well as the practices used by its third-party service providers, including collection attorneys.

According to the consent order (available here), the bank, among other things:

  • caused affidavits to be filed in court where the affiant did not have personal knowledge of the assertions made or had reviewed the relevant books and records;

  • allowed the filing of “inaccurate sworn documents” that resulted in judgments with financial errors in favor of the bank; and

  • failed to “sufficiently oversee outside counsel and other third-party providers” who handled its sworn documents and collections litigation.

[EDITOR’S NOTE: Because of the substantial topics covered by the consent order and its impact upon the collections industry, Maurice & Needleman and insideARM.com are teaming up on a webinar on Friday, September 27, “Assessing the Impact of the JP Morgan Chase Consent Order – Today and Tomorrow.” The webinar will be free. More information is below, or simply register right now.]

Concerning Outside Law Firms

The consent order imposes certain requirements upon the bank, which will impact its collections litigation and the practices of its outside collections litigation counsel. Among those requirements are that the bank establish:

  • a plan ensuring that sworn documents and collections litigation, whether performed by the bank or its outside law firms, comply with all applicable federal and state laws, rules, regulations, court orders and attorney ethics requirements;

  • continued training concerning these legal requirements for the employees of the bank, collection agencies and the outside law firms engaged in collections litigation on at least an annual basis, for new hires and after policies and procedures are updated;

  • policies that allow the bank “appropriate oversight” of its collection agencies and outside law firms to ensure they comply with applicable law;

  • policies and procedures for the bank’s due diligence exams of its existing and potential law firms and collection agencies concerning their “qualifications, expertise, capacity, reputation, complaints, information security” and training, among other things.

Concerning the Bank’s Debt Sales

The consent order requires the bank to revise its policies concerning its sales of charged-off consumer debt. Among the requirements imposed by the consent order are the creation of policies that ensure:

  • the accuracy and integrity of “all information” provided to the purchaser;

  • the information provided to debt buyers is sufficient and appropriate for compliant debt collection activities;

  • debt buyers can receive additional information concerning purchased accounts when necessary, “such as during litigation;”

  • the bank engages in initial and ongoing due diligence of the purchasers of the banks charged-off accounts, “including an evaluation of the debt buyers’ past performance with respect to consumer protection and debt collection laws;”

  • the bank has a “thorough understanding” of the “scope of debt buyers anticipated debt collection activities;” and

  • the bank implements a system that monitors complaints and “any allegations of adverse treatment” by debt buyers.

Chase’s Response

JPMorgan Chase issued a press release Thursday noting that the issues identified in the consent order “were discovered by Chase in internal reviews that began in 2010.” Chase stated that it had stopped filing credit card collection litigation in 2011 and has not restarted the process. The bank noted that less than 1% of its customers were impacted.

“Any mistake is regrettable and does not reflect the high standards we set for ourselves and our commitment to providing all customers an outstanding experience. We are committed to fixing this and getting it right,” the Bank said in its release.

In addition to ceasing credit card collection lawsuits, the Bank reported that it dismissed the impacted lawsuits.

Impact on the Collections Industry

The consent order touches on many areas of the collection industry and will likely serve as a blueprint for future enforcement actions. Because of the substantial topics covered by the consent order and its impact upon the collections industry, Maurice & Needleman will follow-up with a webinar on Friday, September 27, “Assessing the Impact of the JP Morgan Chase Consent Order – Today and Tomorrow.”

We’ve teamed up with our friends here at InsideARM to put together a panel of attorneys known for their knowledge and understanding of consumer financial protection law:

Manny Newburger – Barron & Newburger, P.C.

Joann Needleman – Maurice & Needleman, P.C.

Donald Maurice – Maurice & Needleman, P.C.

The panel will be moderated by Mike Bevel of InsideARM.

The webinar begins at 2 p.m. You can register by clicking here.

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Posted in Collection Law Firms, Collection Laws and Regulations, Credit Card Receivables, Credit Grantors, Debt Buying, Debt Collection, Featured Post .

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Continuing the Discussion

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  • avatar todd bean says:

    “Caused affidavits to be filed in court where the affiant did not have personal knowledge of the assertions made or had reviewed the relevant books and records.”

    Oh, no way, simply shocking.

    P.S. The sky is blue.

    “A plan ensuring that sworn documents and collections litigation, whether performed by the bank or its outside law firms, comply with all applicable federal and state laws, rules, regulations, court orders and attorney ethics requirements.”

    One would think this would be pretty much understood. Gee, you mean that Chase regrouped and formulated a plan and that plan is we will obey the law.

    Good stuff !!

  • avatar Commercial Guy says:

    Of course, the end result of this will likely be the elimination, or at the very least a drastic reduction, of the ability of defendants to prevail on many of the issues they have championed in recent years; notably the issue of standing in reference to debt buyers. If the debt buyers now have all of the documentation and absolutely clear proof that they have standing to file suit, defendants will be left with either accepting responsibility or hoping that the collector violated at some point in the process.

    I see this as a step in the right direction for the industry, and provided the collectors involved manage to avoid violating, a serious blow to the “debt avoidance” groups.

  • avatar ryon gambill says:

    Having been the recipient of constant personal attacks from some debtors and their scheming credit repair hucksters; the “reputation” provision is based on the opinion of whom?

  • avatar Debt Guy says:

    This is all good stuff as far as I’m concerned. Forcing the banks to ensure the data they are selling is accurate and to provide documents that buyers need in litigation is definitely a step in the right direction. Folks who like to game the system are fairly dependent on the hope that “JDB’s” (as they like to call us) won’t be able to present adequate proof in court. Seems like this will go a long way toward not only taking that defense away but also disproving the lie perpetrated by debtors and consumer attorneys that a large number of the underlying debts are illegitimate.

  • avatar Brian says:

    BRAVO! Fix it at the top so the shit doesn’t roll downhill to operators who are already under intense scrutiny whether they’re compliant or not.. This is GOOD news..
    Agency owners and debt buyers rejoice – soon you’ll be fighting “the good battle” with a loaded weapon instead of the water pistols passed down by the banks for decades..

    What will the credit litigants bite into now?

  • avatar todd bean says:

    I can see how having more documentation on the front end could allow you to really make your hand look strong on the front end.

    However, anybody that truly fights a JDB suit could care less about documents. Yes, it is always easier when there is simply nothing but if I’m fighting a JDB in court I could care less what documents they have.

    Myself and anybody that is going to defend against a suit that knows what they are doing are never letting documents in lieu of live testimony be admitted.

    A JDB can have all the documentation in the world but the bottom line there is no way around hearsay because business records exception does not work (of course if properly challenged) because regardless the amount of documents the JDB has no personal first hand knowledge of the origination of the documents.

    You can’t take a document from a Chase file and then open your JDB file and put that document in the file, put it in the file cabinet and then magically claim business records exception.

    Granted it will beef up your bluff and you are likely to get more of the non real fighters but unless you’re willing to get the original creditor and any other buyer in the chain into court you lose against somebody like me.

    I will say that it will at least give you prima facie evidence to defeat a counterclaim that you filed suit with no way to meet your burden if you at least have hearsay documents that actually show you allegedly own what you are suing on.

    The one big spread sheet with thousands of account numbers and nothing more than we have a big pool of debts and your alleged debt is one of those make for easy 1k FDCPA settlements, so true prima facie evidence of standing will at least allow you to defeat those claims, or you will still pay them off anyway because no matter what it is cheaper to pay off 1K to the .05% that will actually sue or counterclaim against you.

  • avatar karen-kellt says:

    Debt Collectors: Get a real job!!!

  • avatar BHA LLC says:

    Good news for debt buyers

    Good news for Debt collectors
    Bad news for frivolous lawsuits.

    Debtors: Don’t spend more than you can pay, because then you have to deal with Debt collectors

  • avatar Debt Guy says:

    Listen to Karen everybody. We’re losers with fake jobs. It’s always a good idea to take financial advice from people who are upset at the world because they can’t manage their own affairs.

  • avatar Jeffery Hartman says:

    I agree with BHA!

  • avatar Sisko says:

    It is my understanding that the reason this isn’t regularly done for all debts is because it is cost ineffective. I can’t help but think that this will increase the purchase price of the debts, and may therefore encourage more lawsuits against debtors. I don’t think the consumers will like the outcome of these loan portfolios after they get sold to the debt buyers. But it certainly sounds like fun from a collector standpoint!

  • avatar Commercial Guy says:

    Well said, BHA. For a side note on the frivolous lawsuit thought, our friend Todd got served up a dose of reality in federal Court Friday…$30K+ in attorney fees for filing suit “in bad faith and with intent to harass…”.

    Another slam dunk for Todd.

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