In 2013, the Attorney General of California noticed an abundance of lawsuits
filed by JPMorgan-Chase that were flooding their courts. The majority
of these lawsuits were debt collection cases against credit card borrowers,
for which many of the cases had scant evidence. Based on her observations,
Attorney General Harris took civil action against JPMorgan-Chase. Following
her action, The state of Mississippi followed California’s lead
and filed a civil action of its own against JPMorgan. The civil actions
sparked investigations at a federal level from the Consumer Financial
Protection Bureau (CFPB) and the Office of the Comptroller of the Currency (OCC).
The CFPB launched a nearly 2 year investigation into JP Morgan, finding
them to have to violated portions of the
Dodd-Frank Wall Street Reform and
Consumer Protection Act. JPMorgan was found to have engaged in several deceptive and abusive activities.
In their first major violation, Chase sold
uncollectable debts to third party collectors. Some of these debts were already paid in full
prior to being sold; settled by an agreement; or discharged in bankruptcy.
They even sold debts that were opened fraudulently. In many cases even
when a debt was legitimate, they neglected to provide how much of the
debt had already been paid.
As a result of selling these unenforceable debts, Chase was found to be
responsible for causing debt collectors to engage in
deceptive collection practices. It is presumed that Chase knew that the collection agencies that purchased
these tainted accounts would attempt to collect. In doing so, Chase is
liable for assisting in the violations.
Another major violation was in regards to errors produced by
“Robo-signing” affidavits. Robo-signing is a tactic that some banks engage in an effort to expedite
their cases through a highly automated review process, for example, where
affidavits are sent to a servicer who in turn simply clicks a button to
attach their digital signature. The issue that arises is that sometimes
an affidavit will be signed without adequatereview. The CFPB deemed that
it was widespread application of this tactic that led to the selling of
many of the aforementioned bad debts.
The CFPB’s massive investigation of JPMorgan came to a close this
past July when they came to a settlement with JPMorgan-Chase. As part
of the agreement JPMorgan will pay a $30 Million civil penalty to the
CFPB, a $95 Million to the 47 effected states, plus another $11 Million
to cover attorney fees. Beyond this, the CFPB additionally listed rules
of practice that JPMorgan must follow, as well as certain limitations
on future sales of debts. This is in addition to the $50 Million in restitution
that JPmorgan was ordered to pay as a result of the OCC’s investigation
into the same matter. JPMorgan may find themselves liable for even more
after the verdicts come down in the still pending civil action lawsuits
in California and Mississippi.