If you happened to be involved in a consumer debt lawsuit with JP Morgan Chase last year or around the beginning of this year, you may have wondered why your collection suit may have been halted or even completely disappeared. This event was the result of an investigation into Chase credit card’s collection activities. According to the Office of the Comptroller of the Currency (OCC) and numerous Chase employees, as well as whistleblower, Linda Almonte, Chase bank has allegedly engaged in the following “errors” or unlawful activity when collecting debts:
Affidavits of Amounts Owed Were Not Verified – According to employees, affidavits were not verified. Employees were told to just sign them because they were time sensitive. A practice known as robo- signing, the mass signing of important documents by banks in foreclosures, was also allegedly occurring with documents filed by Chase Bank and collection accounts. This practice is something that may result in all banks and companies that provide any type of loan or mortgage, to be investigated.
Unreliable Attorneys and Inaccurate Information – Court filings and documents prepared by external attorneys as well as the litigation operations for Chase Credit Cards were inaccurate and unreliable. Attorneys known as “outhouse attorneys” were hired by less populous states in place of in-house attorneys. Outhouse attorneys were paid according to the amount of money that was recovered. Not only that, these attorneys were only connected to the litigation system and were a part of firms such as Mann Bracken, LLP which were known for inaccurate recordkeeping.
Out of Date and Unreliable Technology – Apparently JP Morgan Chase utilized patchy technology and bank computer systems which disagreed on the amounts that were actually owed. The computer systems used were unable to communicate well. Whatever the case, it seemed that each different computer system (TSYS, TCSF and RMS) would come up with a different amount owed.
According to the investigation by Americanbanker.com, TSYS is a system that is licensed from Total Systems Services Inc. It is the interface which consumers use to check their credit card balance online. The Total System software handles only current account. When accounts are late or delinquent, it is passed on to another system called TCSF. This system is used by the folks in collections and litigation. When an account gets charged off, they get moved to another system called RMS. The three different systems do not show the same number when it comes to the amount that is owed by the bank.
Most of these findings are based on information from former and current Chase employees and from whistleblower, Linda Almonte who worked as an executive in the Credit Card Litigation Support Group in Chase’s San Antonio office. Almonte claimed she was terminated in 2009 because she objected to the sale of debts that included incorrect balances owed. It was because of Almonte’s claims that the OCC shutdown the collections operation in April 2011.
Problems With Whistleblower Linda Almonte – Linda Almonte was hired as part of a replacement crew and noted the problems with the systems. She was concerned especially about the faulty and inaccurate recordkeeping of the law firms that were used for the lawsuits and documents almost never matched Chase’s records. Documents were misplaced and destroyed and Almonte ended up being terminated.
Why Ignore Inaccuracies? – Chase Bank was able even amidst the financial crisis in 2008 to expand and increase recoveries and were able to recover $1.2 billion in debt by 2009. Litigation and lawsuits ended up being extremely profitable to JP Morgan Chase. It could only be speculated that these errors an inaccuracies were ignored because debt collection resulted in so much money. Many former employees also believed that the inaccuracies were not large enough to matter. Still, once the inaccuracies are added up, it could result in thousands of dollars. Besides the fact that reporting different amounts owed kind of makes you wonder how reliable the collection practices are in the first place.
What this Means to Consumers – If you are one of the many cardholders that were transferred to Chase when Providian and Washington Mutual were bought out, you likely ended up with a closed account. Almost immediately upon merging, Washington Mutual cardholders found themselves with lowered credit limits (and thus maxed out cards), higher interest rates, and closed credit cards. In one broad sweep, Chase sunk a lot of cardholders who were part of the sub prime market that was once Washington Mutual. Many of those cardholders were able to sign up for hardship programs with lower interest rates and smaller payments (although the cards are still closed and cannot be used).
Bad debt accounts that were once Providian and Washington Mutual, although lacking proper documentation and considered unreliable, were sold to second-hand debt buyers who were suing account holders when the debt was not supposed to be sold in the first place. These past account holders may also want to be aware that because of the investigation, JP Morgan Chase & Co. has currently halted collection lawsuits and judgments in six states, California, Florida, Illinois, Maryland, New York and Washington. Collection cases in most other states have either slowed down or only exist in very small amounts. As with any collection account where litigation is involved, it is recommended that you meet with an attorney. Now that it seems records, robo-signing, attorney records, and computer systems are all reporting inaccurate information, it may be in your best interest if you have delinquent accounts (old or new) with Chase, that you especially consult an attorney before agreeing on payment or going to court.
It is not clear yet how Chase Bank will approach the bad debt accounts while they are being investigated for their numerous alleged violations and inaccuracies. Collection claims have decreased quite a bit nationally and many have been completely dismissed altogether. If you happen to be one of the thousands of debtors in this situation, a former account holder of a Washington Mutual or Providian card account that has been sued, or is being sued, you will want to consult an attorney. Make sure you are aware of you options before agreeing to any kind of plan that Chase has to offer. At least at this point and until the rest is somehow straightened out.