A story in the American Banker from January 2012 claims that JPMorgan Chase has suddenly, and without fanfare, halted pretty much all of the debt collection lawsuits nationwide. Just like that, they folded up their tent and went home.
Chase is one of the largest credit card issuers in the nation, pumping a ton of plastic into the system and making a decent chunk of change. I can only imagine how much the company was bringing into its coffers as a result of suing for past due debts.
According to the article, Chase has lost a few battles in state courts lately. There’s also an allegation floating around that it falsely overstated the balances of thousands of delinquent accounts it sold to a third party.
Still, that doesn’t mean the company takes their ball and leaves the game. Something else is afoot, I suspect.
Chase sells debts to third-party debt buyers, sometimes using forward flow agreements. Perhaps the company has made the decision to let the debt buyers bring lawsuits in their own names, and to sell everything that goes into delinquent status.
I wouldn’t be shocked to hear the company doing that because it eliminates the risk of non-payment, brings in bucks when the debt is sold, and makes it all someone else’s problem.
Chase delinquencies stood at about 2.53% in September 2011, according to this report. That’s a drop in the bucket, but for an issuer that likely has hundreds of millions of dollars in credit outstanding to consumers, 2.53% is big bucks. There’s no way they’re just walking away from that income stream.
If you’re reading this article and thinking you’re home-free and there’s no risk of being sued on an overdue Chase account, remember that companies change policies about as often as I change my socks.
As Chase made this move without publicity, so too may they change their minds without letting us know.
Hat tip to my colleague, Arizona bankruptcy lawyer John Skiba, for pointing out this article to me.
Image credit: Digiart2001 | jason.kuffer
Jay S. Fleischman, the Managing Attorney of our Southern California office, speaks regularly at national events on the subjects of credit, debt, bankruptcy, and consumer protection. 
David B. Shaev, the Managing Attorney of our New York office, has been a bankruptcy lawyer for over 35 years. 
