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Lessons From the Chase Bank Credit Card Robosigning Scandal

Chase Bank agreed in July 2015 to pay more than $200 million to settle claims made by 48 states as well as the Consumer Financial Protection Bureau that it sold faulty credit card debts to third-party collectors.

Understanding what happened provides valuable lessons to anyone who’s being sued for a past due credit card debt.

Chase Halts All Collection Lawsuits

The story began with a report in American Banker from January 2012 that JPMorgan Chase had suddenly halted all of debt collection lawsuits nationwide amid allegations that it falsely overstated the balances of thousands of delinquent accounts it sold to a third party.

Just a few months later, in September 2012, American Banker reported that JPMorgan Chase Bank was being investigated by lawyers representing Mississippi Attorney General Jim Hood, and other states are following suit.

Whistleblower Reveals Robosigning

The inquiries came as a result of a whistleblower suit filed by Linda Almonte, a former midlevel employee who documented a range of improprieties over the years at the banking giant. Those lapses included:

  • failure to reconcile the inconsistent past-due balances generated by the bank’s computer systems;
  • pressure from management to collect delinquent debts even in the absence of complete or accurate records; and
  • robosigning of affidavits that brings into question the legal integrity of Chase’s claims against tens of thousands of consumers.

Internal bank documents and other employees backed Almonte’s accusations, which forced Chase to cease operations in a collections unit previously responsible for billions of dollars in annual revenues.

Consent Order

In 2013 Chase entered into a Consent Order with the Office of the Comptroller of the Currency after similar allegations were made against the banking giant.

Specifically, the federal government found what it termed as being, “unsafe or unsound practices,” in connection with:

  • the Bank’s sworn document and collections litigation practices; and
  • the Bank’s efforts to comply with the Servicemembers Civil Relief Act (“SCRA”)

Though this Consent Order wasn’t directly related to the actions pending by the states, it was an indication that something was amiss.

California Attorney General Takes Action

The State of California took its own action against Chase in May 2013, alleging widespread, illegal robo-signing, among other unlawful practices, to commit debt-collection abuses against approximately 100,000 California credit card borrowers over at least a three-year period.

On one day alone during the period in question, Chase filed 469 debt collection lawsuits in California. The Attorney General’s complaint against Chase claimed that, to maintain this pace, Chase employed unlawful practices as shortcuts.

Those shortcuts, the suit alleged, allowed Chase to obtain judgments, garnish wages, and place liens on property from California consumers at a rate that wouldn’t have otherwise been possible.

The state’s lawsuit seeks penalties of $2,500 for each violation of California law as well as an additional $2,500 for each violation against a senior citizen or person with a disability.

Chase argued that California legal authority precluded the In the lawsuit filed by California State Attorney General Kamala Harris. Superior Court Judge Jane L. Johnson in Los Angeles rejected that argument and in January 2014 denied the bank’s request that the lawsuit be thrown out.

As of this writing, the California lawsuit is ongoing.

A Lesson If You’re Sued For A Debt

Up until the investigation, Chase was filing tens of thousands of lawsuits around the country each month. Most of the people who were sued took no action to defend themselves, ending up with default judgments against them.

Those who stood up to the bank and demanded proof often won the case.

When you’re sued for a debt, the creditor or debt collector is required to prove to the court that you owe the money, that it’s a legally valid debt, and that it’s collectible.

It’s up to you to raise those defenses and demand proof, but when a debt collector can’t prove the case then it’s going to lose.

In many cases, companies that file debt collection lawsuits don’t have the proof they need to win.

Suing Debt Collectors

The Fair Debt Collection Practices Act regulates the ways in which debt collectors can try to collect money from you. In California, our Rosenthal Act provides most of the same protections but extends the regulations to original creditors such as Chase.

Under the FDCPA, a debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. That includes misrepresenting the character, amount, or legal status of any debt.

If you’ve been contacted by a debt collector, you likely want to get some proof that you owe the debt before forking over your hard-earned money. If the numbers don’t match up or if the proof is (ahem) unavailable, you may want to talk with me about taking action.

Always Be Watching

The bottom line is this: when it comes to debt collectors, you’ve got to be on the lookout at all times.

Keep notes, demand proof, and talk with a lawyer who knows the score. An ounce of prevention will not only protect your rights, it might also save you a fistful of cash.

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By |October 16th, 2015|

About the Author:

I've been a consumer protection lawyer since 1995, working to help people end their bill problems. I'm a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.
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