California: JPMorgan Chase Ran Abusive Credit-Card 'Debt Collection Mill'

California: JPMorgan Chase Ran Abusive Credit-Card 'Debt Collection Mill'
(Photo Credit: Justin Sullivan/Getty Images North America)

California’s attorney general has filed a blistering lawsuit against the nation’s biggest bank, alleging that JPMorgan Chase ran a “massive debt collection mill” that flooded the state’s courts with flimsy cases based on the “robo-signing” of documents.
The suit alleges that Chase engaged in widespread, illegal robo-signing — a practice made infamous in wrongful foreclosure cases — to save time and money in a breakneck pace of debt-collection filings against about 100,000 California credit-card borrowers.
The bank’s filings occurred over at least a three-year period.
At the heart of JPMorgan’s unlawful conduct “is the rampant use of ‘robo-signing’ —a practice of signing declarations, affidavits, and other documents in mass quantities, typically hundreds at a time, without any knowledge of the facts alleged in the document and without regard to the truth or accuracy of those facts,” the suit brought by California Attorney General Kamala Harris alleges.
The lawsuits that JPMorgan Chase filed against credit card customers were so weak that the lender was “betting that borrowers would lack the resources or legal sophistication to call (the bank’s) bluff,” reads California’s complaint.
California’s suit seeks a permanent injunction against such alleged practices and civil penalties and restitution that could amount to tens of millions of dollars. Harris is seeking a civil penalty of $2,500 for every single violation of law.
“Chase abused the judicial process and engaged in serious misconduct against California credit card borrowers,” Attorney General Harris said. “This enforcement action seeks to hold Chase accountable for systematically using illegal tactics to flood California’s courts with specious lawsuits against consumers. My office will demand a permanent halt to these practices and redress for borrowers who have been harmed.”
From January 2008 through April 2011, Chase filed thousands of debt collection lawsuits every month in California, the AG’s complaint states. On one day alone, Chase filed 469 such lawsuits.
From the AG’s complaint:

“Rather than follow basic procedures to ensure fundamental fairness to California consumers, Defendants have run a massive debt collection mill that abuses the California judicial process to obtain default judgments, writs of execution, and wage-garnishment orders on the backs of lawsuits that cannot withstand scrutiny.
“At nearly every stage of the collection process, Defendants have cut corners in the name of speed, cost savings, and their own convenience, providing only the thinnest veneer of legitimacy to their lawsuits.”

Here’s an overview of the alleged misconduct provided by California’s attorney general:

  • Robo-signing: Chase illegally robo-signed various litigation filings, including sworn documents, declarations, and verified complaints, without reviewing the relevant files or bank records or even reading the documents before signing.
  • “Sewer Service”: Chase failed to properly serve notice of debt collection lawsuits against consumers while claiming they had been served as required by law. This practice, known as “sewer service,” deprives the consumer of any notice of the lawsuit.
  • Filing Irregularities: Chase haphazardly assembled its official legal filings. For example, Chase failed to redact consumers’ personal information in attachments to filings, potentially exposing them to identity theft and in violation of California law. In addition, when asking courts to enter default judgments against consumers, Chase consistently swore under penalty of perjury that the consumers were not on active military duty. In fact, Chase never checked.  This deprived servicemembers of important legal protections to which they are entitled while on active duty.

Consumers who believe they have been victims can submit a complaint online at http://oag.ca.gov/consumers.

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