JPMorgan Chase has been taken to task by U.S. regulators and attorneys general in 47 states for allegedly selling credit card debt that was not properly screened, and illegally “robo-signing” court documents.
The Consumer Finance Protection Bureau said that Chase sold “zombie debts” to third-party debt buyers, which include consumer accounts that were inaccurate, settled, discharged in bankruptcy, not owed, or otherwise not collectible.
Under a consent order, the CFPB is now requiring that Chase document and confirm debts before selling them to debt buyers or filing collections lawsuits. Chase must also prohibit debt buyers from reselling debt and is barred from selling certain debts.
Chase is ordered to permanently stop all attempts to collect, enforce in court, or sell more than 528,000 consumers’ accounts.
Additionally, Chase will pay at least $50 million in consumer refunds, $136 million in penalties and payments to the CFPB and the states which took action, and a $30 million penalty to the Office of the Comptroller of the Currency (OCC), a separate bank regulator, in a related action.
“Chase sold bad credit card debt and robo-signed documents in violation of law,” said CFPB Director Richard Cordray. “Today we are ordering Chase to permanently halt collections on more than 528,000 accounts and overhaul its debt-sales practices. We will continue to be vigilant in taking action against deceptive debt sales and collections practices that exploit consumers.”
The CFPB said Chase violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibitions against unfair, deceptive, or abusive acts and practices.
Specifically, the CFPB and the states said that Chase:
Sold bad debts to third-party debt buyers: Chase sold certain accounts that had 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, or that were otherwise no longer enforceable. Chase also sold debts with missing or erroneous information such as whether the debt had been paid and the amount owed.
Assisted third-party debt buyers in deceptively collecting debt: By selling inaccurate or uncollectable debts, Chase subjected certain consumers to debt collection by its debt buyers on accounts that were not theirs, in amounts that were incorrect or uncollectable. Chase knew, or should have known, that third-party debt buyers would seek to collect these faulty debts. Therefore, by providing inadequate or incorrect information, Chase assisted debt buyers in deceptive collection activities.
Robo-signed affidavits to sue consumers for unverified debt: Chase filed more than 528,000 debt collections lawsuits against consumers and provided more than 150,000 sworn statements to debt buyers for their collections lawsuits against consumers, often using robo-signed documents. In doing so, Chase systematically failed to prepare, review, and execute truthful statements as required by law. Chase also made calculation errors when filing debt collection lawsuits that sometimes resulted in judgments against consumers for incorrect amounts. Chase failed to notify consumers and the courts once it learned of these problems.