Feds Probing Chase On Credit Card Collection Practices

Following the lead of whistleblowers, the Office of the Comptroller of the Currency has reportedly been investigating JPMorgan Chase over allegations that, over the course of at least two years, the bank used inaccurate records when suing thousands of delinquent credit card customers.

According to an in-depth report by The American Banker, the problems with Chase’s credit card collections business was three-pronged.

First there is the patchwork network of computer systems used to track and store customers’ account data. There’s one system for current account holders, one for collections and litigation, and another for charge-offs.

So if someone who was heavily delinquent made a payment on their account, the systems didn’t quite know how to communicate this information and incorrect balances were recorded.

“I came across that on a regular basis,” said one former Chase employee. “There was no way to reconcile those balances that I knew of.”

The problem was then compounded by the second factor: Outside, or so-called “outhouse” attorneys who were paid according to how much money they recovered but who only had access to the one account system.

For years, Chase employees would review these outhouse lawyers’ work to make sure it matched the correct account information. But then the whole system got stuck in the derriere with the third problem prong: Crappy new managers.

In 2008, the new management swooped in and began to flood the Chase coffers with collected cash. The bank went from recovering around $130 million annually to collecting billions within the new bosses’ first year.

Former employees say that the former systems for checking that account information was accurate was suddenly no longer a priority. Instead, they “measured everything in terms of number of dollars collected.”

Mid-level executives who complained were shown the door and staff fell in line with the new regime, says American Banker.

This means that those outhouse attorneys who had been kept in check by Chase employees now were going out and suing customers with account info that was inaccurate in as many as one out of five cases for some firms.

And writes American Banker, things began to get very sloppy at the Chase credit collections offices:

Borrower correspondence sent to the San Antonio facility, such as bankruptcy notifications, address changes, and hardship requests were being dropped on an unmanned desk, according to a 2009 printout from Chase’s troubleshooting log.

The whistle blower who brought these allegations to the government’s attention says it went even further, accusing the bank of shredding records of borrower payments and counter-judgments extinguishing debts.

And just like in the mortgage foreclosure robosigning scandal, Chase allegedly had people signing off on collections documents without ever having reviewed any of the information.

“Hardly, if ever, was anything verified,” the whistle blower told the SEC. “There was constant complaining by the Attorney Liaisons about having to manually sign these affidavits … they always questioned why they could not have them digitally signed in bulk.”

The OCC’s ongoing investigation into Chase’s collections forced the bank into quietly halting its practice of suing delinquent credit card customers. Depending on the outcome of the probe, the bank could be on the hook for a mountain of cash and penalties for all the lawsuits brought using inaccurate account information.

OCC Probing JPMorgan Chase Credit Card Collections [AmericanBanker.com]

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  1. Cat says:

    “Feds Probing Chase” Hmm, not in the manner they should be “probed”.

  2. MichaelRyanSD says:

    What, you give us this info now!! After the vote for WCIA that had BofA vs Chase…..

    Someone should whistleblow you guys

  3. geopapa says:

    So will the new management get bonuses for this F_ _ K _ P!!!

  4. areaman says:

    I setup part of my direct deposit to a second bank. I’m ramping up to make the move away from Chase. Would do it sooner if they started charging fees.

  5. Kate says:

    OK, where’s the standard libertarian – if you don’t like it, you shouldn’t do business with them apologitics.

  6. u1itn0w2day says:

    I know some people given off the record instructions from the unofficial play book of debt settlement with credit card companies all based on the premise that these companies and/or collection agencies would never bother to go to court and/or eventually give up/go away. WRONG. Debt collection has gotten as aggressive as ever.

    Setting aside the voluminous phone calls these companies have taken them to court AND actually showed up to hearings. In the mean time people who used these tactics a decade ago are stunned by the results now. Point being debt collection is not going away anytime soon. Nor are many of their tactics, practices and/or mistakes.

  7. AcctbyDay says:

    *Good… Good…. , rubs hands together*

  8. Shadowfire says:

    You guys need to post a real negative BoA article now. You know, for fairness.

  9. AllanG54 says:

    I did the same kind of work for another “too big to fail” bank back in the 80s. I was the collections supervisor for our legal dept in credit cards. We only had one system and anyone could check a balance at any time, even the people in regular customer service. I don’t understand why this would be so hard to do at Chase.

    • econobiker says:

      Breakage- they want it to be hard plus some vp doesn’t want to spend the money to upgrade the computer systems…

  10. StarKillerX says:

    While I wont defend Chase, if they did this they should suffer for it, but I have issues with the whole “former employee” issue. I mean if he was fired for objecting to this activity it’s one thing, and if so he should be rewarded should Chase be proven guilty, if on the otherhand it’s simply a disgruntled employee looking to grab some cash I am considerably less sympathetic toward them, although the punishment for Chase should be the same.

  11. Mike says:

    Since corporations are people, Chase should go to jail for fraud.

  12. Buckus says:

    Of course what will happen is Chase will pay a fine worth about 25% of their ill-gotten gains, told to “Keep a clean nose” and released on their own recognizance, with no follow-up visit to determine if they’re still following the law. Then they’ll go back to what they’re doing.

  13. CreditSense-CreditRecovery says:

    Fed Probe… white over-coats and rubber gloves anybody? And the hits just keep coming. So if you have a serious distaste for big banks now, what’s your alternative? Bueller? Bueller?

  14. econobiker says:

    Chase definitely sold some of the bogus old Providian (Washington Mutual) accounts because those scumbag bottom feeders Palisades Collection (just search for them and you’ll see) started robo calling my wife’s relative around 2010 about a Providian account which she had discharged due to bankruptcy in 2002-3.

    “Among the files Chase was selling, Almonte said, were former Providian Financial Corp debts that had previously belonged to the failed Washington Mutual. (JPMorgan acquired Wamu’s assets from the Federal Deposit Insurance Corp. in 2008.) The Providian files had been labeled with a code that that the credit card litigation group used to signal “toxic waste,” she says.

    Another person familiar with the files confirmed that the Providian accounts were commonly referred to with that term. The debt had long been considered unreliable and lacked documentation. It was never supposed to be sold, this person says.”