Another big-name financial institution has agreed to a big-dollar settlement stemming from alleged improper business practices, including robo-signing. This time it’s the nation’s largest bank, JPMorgan Chase & Co., accused of violating various state and federal laws in collecting and selling consumer credit card debt, and the price tag will run at least $125 million. The settlement, expected to be announced next week, involves 47 states, the District of Columbia and the federal Consumer Financial Protection Bureau (CFPB). It includes about $50 million in restitution, with $30 million allocated to the CFPB and the rest to the states and D.C. Mississippi and California have brought separate lawsuits and are not part of the settlement.
The lawsuits claimed that the bank relied on robo-signing and other dubious collection methods in pursuing delinquent customers’ credit card accounts. A “Robo-signed” affidavit is when a bank’s employee attests in a sworn court statement as to the amount, delinquency and other details of a customer’s debt without properly verifying the veracity of such information. According to the settlement, Chase filed over a half million collection lawsuits during the years at issue (2009-2013), while the California lawsuit claims that over 100,000 such lawsuits were filed against credit card customers over a three-year period, including over 400 in a single day. The Mississippi lawsuit says that the bank had a serious lack of quality control in its collection practices. Chase also purportedly improperly sold consumer debt which had, for example, already been paid in full, discharged in bankruptcy or previously transferred by Chase.
Two years ago, the CFPB ordered Chase to refund over $300 million to nearly 2 million credit card customers due to illegal lending practices, including failing to provide credit monitoring services while charging for such services. At the same time, the bank consent entered into a consent order with the Office of the Comptroller of the Currency over debt collection practices including robo-signing. Under the current settlement, among other requirements Chase will also have to notify the three major credit-reporting bureaus to remove derogatory entries on its customers’ credit records arising from the collection lawsuits and drop all remaining lawsuits against the customers, possibly helping some retain the good credit they would have otherwise lost.