JPMorgan Chase to Pay $125M to Settle Debt Collection Investigations

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According to an exclusive Reuters report, JPMorgan Chase will be paying $125 million to settle investigations by state and federal authorities, some dating back to 2013, related to the improper sale and collection of consumer credit card debt.

Chase reportedly expects to pay approximately $95 million to 47 states and the District of Columbia, $30 million to the CFPB, and $50 million to consumers as restitution.

The report states that the agreement with regulators could be formally announced as soon as today.

In fact, a press call has been scheduled by the CFPB, which will include Director Richard Cordray, OCC Comptroller Thomas Curry, Iowa Attorney General Tom Miller, and Illinois Attorney General Lisa Madigan. The subject of the call was not yet disclosed except “to discuss debt collection enforcement action.”

insideARM will report further once details are announced.

UPDATED 12:55 PM EDT 7/8/15 -

The consent order can be found at: http://www.consumerfinance.gov/f/201507_cfpb_consent-order-chase-bank-usa-na-and-chase-bankcard-services-inc.pdf

The CFPB found that Chase violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibitions against unfair, deceptive, or abusive acts and practices. Chase sold faulty and false debts to third-party collectors, including accounts with unlawfully obtained judgments, inaccurate balances, and paid-off balances. Chase also sold debts that were owed by deceased borrowers. Chase also filed misleading debt-collections lawsuits against consumers using robo-signed and illegally sworn statements to obtain false or inaccurate judgments for unverified debts. Specifically, the CFPB and states found that Chase:

  • Sold bad debts to third-party debt buyers:  Chase sold certain accounts that had already been settled by agreement, paid in full, discharged in bankruptcy, identified as fraudulent and not owed by the debtor, subject to an agreed-upon payment plan, no longer owned by Chase, or that were otherwise no longer enforceable. Chase also sold debts with missing or erroneous information such as whether the debt had been paid and the amount owed.
  • Assisted third-party debt buyers in deceptively collecting debt: By selling inaccurate or uncollectable debts, Chase subjected certain consumers to debt collection by its debt buyers on accounts that were not theirs, in amounts that were incorrect or uncollectable. Chase knew, or should have known, that third-party debt buyers would seek to collect these faulty debts. Therefore, by providing inadequate or incorrect information, Chase assisted debt buyers in deceptive collection activities.
  • Robo-signed affidavits to sue consumers for unverified debt:  Chase filed more than 528,000 debt collections lawsuits against consumers and provided more than 150,000 sworn statements to debt buyers for their collections lawsuits against consumers, often using robo-signed documents. In doing so, Chase systematically failed to prepare, review, and execute truthful statements as required by law.  Chase also made calculation errors when filing debt collection lawsuits that sometimes resulted in judgments against consumers for incorrect amounts. Chase failed to notify consumers and the courts once it learned of these problems.

Specifically, the order requires Chase to:

  • Cease collecting on 528,000 accounts: Chase cannot collect, enforce in court, sell, or transfer debts for consumers whose Chase credit card accounts were sent to collections litigation between January 1, 2009 to June 30, 2014. If Chase previously obtained a court judgment requiring consumers to pay the debt, Chase will notify the consumer that they will not try to collect, enforce, or sell the judgment. Chase will also contact the three major credit reporting companies to request that the judgments not be reported against consumers. These accounts had an original face value estimated at several billion dollars when Chase sent them to collections litigation. The actual market value is now estimated in the tens or hundreds of millions of dollars. Debt relief of this kind permanently protects consumers from any further collections and judgments on these accounts.
  • Pay at least $50 million in cash redress to consumers: Chase will pay cash refunds to consumers against whom collections litigation was pending between January 1, 2009 and June 30, 2014, for amounts paid above what the consumer owed when the debt was referred for litigation, plus 25 percent of the excess amount paid.
  • Prohibit debt buyers from reselling accounts: Chase must require by contract or agreement that debt buyers cannot resell debts purchased from Chase, unless to sell back to Chase.
  • Confirm debt before selling to debt buyers: Chase cannot sell debts that have been paid, settled, discharged, or are otherwise uncollectable. Prior to sale, Chase must provide account-level documentation to debt buyers confirming that the debts are accurate and enforceable. For a minimum of three years after selling the debt, Chase must make certain additional account information available to debt buyers including agreements, statements, and dispute records.
  • Notify consumers that their debt has been sold and make their account information available to them: Chase must notify consumers when their account is sold and reveal who purchased the account, the amount owed at the time of sale, and that consumers can request further information about their accounts at no charge.
  • Not sell zombie debts and other specified debts: Chase may not sell debts that do not have the required documentation, have been charged off for over three years or where the consumer has not paid for three years, are in litigation, are owed by a servicemember, are owed by someone who is deceased, or where the debtor has a payment plan.
  • Withdraw, dismiss, or terminate collections litigation: Chase will withdraw, dismiss, or terminate all pre-judgment collections litigation pending at any time after January 1, 2009.
  • Stop robo-signing affidavits: Declarations must be signed by hand, must reflect the actual date of signing, and must be based on the direct knowledge of the person signing and their review of Chase’s business records.  Supporting documents submitted for debt collection litigation must be actual records of the debt, verified to be accurate, and not created solely for litigation.
  • Verify debts when filing a lawsuit: When filing collections lawsuits, Chase is required to submit specific information associated with the debt including the name of the creditor at the time of the last payment, the date of the last extension of credit, the date of the last payment, the amount of debt owed, and a breakdown of any post-charge-off interest and fees.
  • Pay $30 million civil penalty: Chase will pay a fine for its unlawful debt sales and robo-signing practices.

Chase must also implement policies, procedures, systems, and controls to ensure compliance with federal consumer financial laws when selling and collecting debts.

The Bureau is joined by 47 states and the District of Columbia in today’s action.  The Bureau also worked in coordination with the OCC, which entered into a related agreement with Chase in 2013. The total relief to consumers includes debt relief associated with halting collections on more than 528,000 consumers’ accounts and at least $50 million in refunds. The amount of penalties and payments to states includes a $30 million civil penalty paid to the CFPB, a $30 million civil penalty paid to the OCC on the related matter, and $106 million in payments to states.

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Posted in Charge-off, Collection Laws and Regulations, Credit Card Accounts Receivable, Credit Card Receivables, Credit Grantors, Debt Buying, Debt Collection, Debt Recovery, Featured Post .

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  • avatar Juan Blanco says:

    So, here my issue. “Chase reportedly expects to pay approximately $95 million to 47 states and the District of Columbia, $30 million to the CFPB, and $50 million to consumers as restitution”. Does the CFPB or all 50 States really need to divvy up $125M? If this is truly an attempt to vindicate consumers that may have suffered damages, why don’t they distribute 100% of the settlement to the impacted consumers? Am I missing something here?

  • avatar Linda Almonte says:

    First the numbers have grown since then last I heard $216 million and climbing and I am sure if investors start complaining about the as stated above lies told to them directly in meetings, investor reports and sec filings the number will grow further. The biggest take away should be everyone reading this knows it was an issue in 2009 and still is. The industry was given multiple times to clean up in 2011, again with the Consent order with the gift of a cooperation agreement and no monetary penalty if they put it into compliance. But yet from 2009-this report another 4.5 Billion was brought in using these practices already known to be out of complaince and outright illegal and abusive to customers. The message is no more excuses no more bandaids get it together right or you can be replaced very easily with those who can. As American Banker stated Friday this is the first in what to expect industry wide so no musical chairs either. Everyone is just tired and done of the same issues over and over and the act of integrity and the good of the economy I don’t know how it is being said with a straight face a normal person couldn’t. BTW did you check out all the knew employment rights and whistleblower laws for all levels and positions in banks and third parties? Efforts are underway to make sure all employees are fully trained whether internally as they should or available externally. And the clamp down on retaliation too plus add in the compliance people. Seems like maybe getting back to basics and doing it right should be the first agenda. Just my opinion. Linda Almonte

  • avatar Linda Almonte says:

    Here is the latest updated version with more fines and detailed requirements and the Credit Card Division is now under CFPB Oversight and fulfilling all requirements in the orders. Such as it does not put processes in compliance by taking away access to employees to the system of record if you only see the one typically with the issues to lack of batch processing you don’t know there is any balance issues right. All of those suits done by Chase or debt buyers are going to be a real pain to do but now is being triple checked since this is round three. The employees got their system access back after two years but then were told all printers would be removed they were going paperless. If they take anything else away from this group it will be the first nude call/operations center. The reason well my take on it that it has to be broken up by the different agencies and states is because differnt agencies are empowered for different items. 47 seven of the states agreed to a settlement. (I am already getting slammed with messages of a lot of people missed in that mostly WaMu/Providian Cards) The FTC in this industry just third parties non litigation, the OCC only items on bank books and certain regulatory violations, the CFPB is the only one that can handle accounts in any litigation internal plus external. The need wasn’t really there until after the surge in litigation then the mega surge after the fall of NAF. (Fred think about that). Plus the SEC has not issued a NFA and this was industry wide because of all of the touchpoints. Putting in the consent orders the credit card division do not expect profits for years will have to have an impact to the full industry. Mississippi AG suit and the California with Kamela Harris did not join in with the other 47 but California last I knew won the motion to dismiss and Mississippi spent 18 months building theirs and a lot of money into depositions and discovery so I don’t see him giving up. There is also a lot of variation in the states based on if they were internal legal states, external but with a direct contract or attorney network. And of course the differences just due to location and what the footprint states were. From what I have read and heard this should be considered the industry standard going forward. The nationwide clean up of default judgments all vacated and refunded is going to take some very organized knowledgable people. That will be a nightmare. And then the refunding people that were sifs and pifs years ago with refunds coming and most are plus 25%. I am not sure how the 1099c issue will be resolved. No matter how much it hurts going to have to do a full clean up and as stated no selling of accounts past the first and the requirements of basic information on all accounts. All the major banks bought a very expensive system that does all of what is being asked for and included all of the scrubs, batch processing, accounting, workflow, imaging, dialer interface, all third party processing and digistized 1099 along with built in compliance monitoring and employee and management scorescards real time if you want. This is bought and paid for hundreds of millions of dollars and is a web based gooey overlay over all of your legacy systems. Most banks bought it when it came out and started conversions. At WaMu I led the project of what was supposed to be building a organic from scratch credit card division all new systems, processes, tools and toys, and 100% compliance with huge efficiency gains and increases to dollars collected and liquidtion. Then after two years of a lot of us building this from scratch turn on the news and they bought Providian and using their system instead. But we still put a lot of consumer on it and would solve most compliance issues. The banks have it on their shared drive the people with the documentation at multiple banks are still there and have those business requirements and now other banks are moving to it like USAA. But the work is done and the systems paid for and coded flip them on and be rockstars.If you look on my linkedin and my work experience it has the results of just putting a section of WaMu on this for collections, loss mit banko, foreclosure, reo, auto, cards and HELOC. We never got the cards in the rest was cancelled after Chase. But it could be an industrywide answer for the companies, regulators, much happier employees and customers and a really lot of money. Check it out.

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