Chase Credit Card Settlement Halts Collections On 528,000 Accounts

Earlier today, we told you of reports that JPMorgan Chase had agreed to pay at least $125 million to close the books on state and federal investigations into its credit card collections practices. Now that the details of the deal have been made public, we know exactly how much the bank will pay and how many credit card accounts are affected.

According to the consent order [PDF] issued by the Consumer Financial Protection Bureau, between 2009 and 2013, Chase used questionable methods to collect on credit card debt.

The bank’s practices included using so-called “robosigned” affidavits — documents that were expeditiously signed without proper, if any, review — in lawsuits filed against alleged debtors. The CFPB says that Chase filed more than 528,000 debt collections lawsuits during the years in question.

Chase also made miscalculations in some of these lawsuits, resulting in debtors facing judgements for the wrong amounts. And even after the bank learned of its mistakes, the CFPB says Chase failed to notify the courts or the affected customers.

The bank also sold off a lot of its credit card debt to third-party buyers who were then free to try to collect the money. But the CFPB says Chase sold some accounts that were:
• 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,
• otherwise no longer enforceable.

Debt buyers were also sold debts with missing or erroneous information. Compounding the problem, when these collectors went to sue the alleged debtors, Chase provided “sworn” statements for these lawsuits that had actually been robosigned. The CFPB says this happened more than 150,000 times.

Chase put a stop on new lawsuits against credit card debtors in 2011 and stopped selling debt to third-party buyers in 2013, but the CFPB enforcement action puts additional demands on the bank.

• Cease collecting on 528,000 accounts: The bank will halt collection actions, including pending legal actions, or the sale or transfer of debt, on 528,000 credit card accounts sent to collections litigation between January 1, 2009 to June 30, 2014.

In cases where the bank has already received a judgement in its favor, it must notify the consumer that it will no longer try to collect, enforce, or sell that judgment. Chase must also contact the three major credit reporting agencies — Experian, TransUnion, and Equifax — to request that these judgments not be reported against consumers.

• Pay at least $50 million in cash redress to consumers: The bank must pay cash refunds to alleged debtors 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% of the excess amount paid.

• Prohibit debt buyers from reselling accounts: Any debt buyers who purchased credit card debt from Chase must be told they cannot resell that debt, unless it’s resold back to the bank.

• 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: 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.

Of the total $136 million settlement, $106 million will go to the 47 states, and the District of Columbia, that took part in the deal.

In a statement e-mailed to Consumerist, Chase points out that only a small percentage of its customers were affected by the practices at the core of this settlement.

“We are pleased to resolve these legacy issues and are working to complete our remediation of affected credit card customers,” reads the statement.

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.