JP Morgan Chase Faces Allegations of Debt Collection Fraud

Is the bank that issued your credit card dunning you for money it says you owe it? It’s possible.

There’s nothing wrong with them trying to get it, as long as they do it in an orderly, transparent and lawful way. However, when evidence of wrong-doing occurs, the legal system is obliged to act.

That’s why California State Attorney General Kamala Harris last week filed suit against JPMorgan Chase, accusing the financial giant of widespread fraudulent practices, illegal misconduct, and other debt-collection abuses against approximately 100,000 California credit card borrowers between 2008 and 2011.

The lawsuit, filed in Los Angeles Superior Court, alleges that at every stage of the collection process, Chase “cut corners in the name of speed, cost savings, and their own convenience, providing only the thinnest veneer of legitimacy to their lawsuits.”

Allegations against Chase

Robo-Signing – Employees routinely and automatically signed affidavits, court documents that stand in for the actual account contracts and statements as proof of a borrower’s debt in a lawsuit, without methodically reviewing the relevant files, bank records, or in some cases, reading the documents at all. That’s how the bank filed 469 lawsuits, based on illegitimate documents, in a single day.
Sewer Service – The law requires banks to serve notice of debt collection lawsuits on debtors so they can contest the charges in court. Chase frequently failed to serve these notices and then filed false affidavits, claiming the notices were properly served. When the borrowers don’t show up in court to challenge the accuracy of the bank’s claims, courts issue summary judgments in favor of the bank, giving it the right to garnish borrowers’ wages or freeze bank accounts to withdraw money it says it’s owed.
Filing Irregularities – Chase recklessly assembled its official legal filings, exposing some borrowers to possible identify theft by not redacting certain personal information from attachments to files. The bank also lied on numerous occasions by suggesting that certain borrowers were not on active military duty, which provides service members some protections against debt collection, when, in fact, it never checked their military status.

Chase isn’t the only bank that may be guilty of these transgressions, but it’s the first one that’s officially charged.

Noach Dear, a civil court judge in Brooklyn, told the New York Times in 2012 that companies like American Express, Citigroup and Discover Financial file nearly 100 credit card lawsuit daily. About 90 percent of those cases are just as flawed, with the plaintiffs not being able to prove that a borrower actually owes the debt the bank claims is overdue, Dear said in the report.

Face It: Banks Want Their Money

Not everyone pays their credit card bills in a timely manner and you may be one of them.

Equifax, one of the nation’s three big credit bureaus, shows American borrowers are about $18.7 billion behind on paying off their credit card debts.

While banks are trying to collect their money, the federal government has long imposed strict standards of fairness regarding the way debt collection may be carried out in this country.

In 1977, for example, Congress passed the Fair Debt Collection Practices Act (FDCPA) in order to eliminate deceptive, threatening and abusive practices by the debt collection industry – the third-party collectors who purchase banks’ and lenders’ charged-off debts at a discount and then attempt to collect as many of them as possible in order to make a profit.

And even though a first-party creditor, like your bank, is not subject to the rules of the FDCPA, the Dodd-Frank Act, various state laws and Section 5 of the Federal Trade Commission (FTC) all prohibit banks and other first-party lenders from engaging in unfair, deceptive or abusive practices in their own collection activities.

Jail Time for Bank CEOs

It seems that the nation’s big banks have learned absolutely nothing from the penalties imposed on them for the illegal practices they engaged in – like robo-signing documents – during the recent foreclosure crisis. Although they were ordered to repay billions of dollars to harmed customers, their illegal behavior continues unabated, only now, in a different part of their business.

Since big fines don’t seem to prevent unlawful behavior – the banks pay them off as the cost of doing business and then go about their dishonest ways – maybe it’s time to put some CEOs in jail. After all, any other person pulling off the same scams and shams that these banks have allegedly perpetrated would be looking at doing some serious hard time.

Why are bank executives, who knowingly allow these crimes under their direction, be the only class of Americans immune to the punishments afforded by the country’s penal system?

Attorney General Harris should not be satisfied with a mea culpa and a monetary penalty. It’s time to switch some grey flannel suits into prison stripes.

If you suspect that your bank is unfairly or unlawfully trying to collect money from you that it says it is owed, know that you have protection under the law. Contact your State Attorney General’s Office or the Federal Trade Commission and make your voice heard.

Bill Fay

Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].