By Katalina M. Bianco, J.D.
Selling “zombie” debts, robo-signing court documents, and failing to accord proper protections to servicemembers are among the consumer debt collection violations committed by various JPMorgan Chase companies, according to the Consumer Financial Protection Bureau, Office of the Comptroller of the Currency, and 48 attorneys general. Three banks and one credit card servicing company agreed to pay at least $216 million in consumer refunds and civil penalties, in addition to at least $50 million in refunds the OCC says already have been paid.
Aa part of the settlement agreement, Chase agreed to stop all collection efforts on 528,000 consumer accounts. According to the CFPB, these accounts had a face value of several billion dollars when Chase sent them to debt collectors, and “The actual market value is now estimated in the tens or hundreds of millions of dollars.”
Separate consent orders were entered by the two agencies to resolve the related actions. The CFPB’s enforcement action also settled charges by 47 states and the District of Columbia. Chase agreed to the orders but did not admit to any wrongdoing.
Bureau action. The CFPB’s investigation focused on credit card accounts that went into default between 2009 and 2013. According to the bureau, Chase sold some of these accounts to third-party debt collectors, providing account information using electronic files. When necessary, Chase employees also signed affidavits for use in collection suits.
The bureau charged that the electronic files included: accounts with unlawfully obtained judgments, accounts with inaccurate balances, accounts that had been paid off, accounts that had been discharged in bankruptcy, accounts that had been opened fraudulently, accounts that already were subject to payment plans, accounts that Chase had previously sold, and accounts that were owed by deceased consumers. Since Chase knew the debt collectors would rely on the information, it assisted them in deceptive collection activities, the CFPB said.
The 528,000 accounts that Chase may no longer attempt to collect include those over which collection suits were filed. The companies provided the debt collectors with more than 150,000 affidavits for use in these suits, and in the process it “systematically failed to prepare, review, and execute truthful statements as required by law,” according to the CFPB.
CFPB action remedies. Under the CFPB consent order, Chase agrees to halt collection efforts on the 528,000 accounts, notify consumers it will not attempt to enforce court judgments, and take steps to prevent inclusion of the accounts in consumer reports. Chase will pay a minumum of $50 million in consumer redress, including a 25-percent penalty to consumers who paid more than they owed plus a $30 million civil money penalty.
OCC action. The OCC’s consent order resulted from a 2013 settlement of charges related to debt collection litigation practices, including robo-signing documents, and violations of the Servicemembers Civil Relief Act. In that settlement, Chase agreed to take described remedial action, and the OCC deferred the entry of any civil penalty. While Chase has since repaid more than $50 million to consumers, the OCC determined that “the full extent of the deficiencies” called for an additional $30 million penalty.
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