On December 17, 2013, following a detailed eighteen (18) month investigation, the State of Mississippi sued JPMorgan Chase & Company, Chase Bank USA, N.A., and Chase Bankcard Services, Inc. regarding their consumer credit card debt collection practices. Mississippi’s thirty-five (35) page lawsuit details what those of us who represent and protect consumers against unlawful debt collection actions have been encountering in recent years. This lawsuit is not about lawful debt collection efforts directed towards consumers who legitimately owe credit card debts. Rather, this suit is about the extraordinary lengths to which JPMorgan Chase has gone to collect debts that had already been paid or settled, were not owed in the first place, or were lawfully forgiven in bankruptcy all for the sake of reaping hundreds of millions in profits. If you’re wondering how this could possibly happen, please read on.
A bit of background information is helpful to understand why Mississippi is suing one of the largest credit card lenders in the country. According to Mississippi’s lawsuit, Chase has approximately 64 million card holders representing about $128 billion in consumer debt as of 2012. Consumer credit and debt collection is big business with big profits to be made by the companies in the industry. JPMorgan Chase, like other companies in the industry, pursues these profits with vigor and often with reckless disregard for whether the debts are lawfully owed. The company made $1.2 billion in 2009 on credit card recoveries alone according to the lawsuit. The methods used by JPMorgan Chase to collect these “debts” include telephone calls, debt collection letters, and lawsuits against consumers. While these methods of debt collection are not, in and of themselves, wrongful, the use of such methods against consumers who do not owe any debt is wrongful. And that is what Mississippi’s suit against JPMorgan Chase is basically about.
So what has JPMorgan Chase done that’s so wrong? According to Mississippi’s lawsuit, lots of things. One area of misconduct relates to how JPMorgan Chase keeps, or fails to keep, complete and accurate records of consumer account information. Such information would include, at a minimum, a copy of the original agreement between the consumer and JPMorgan Chase dating back to the origination of the account and an accounting of charges, payments, fees and the like occurring on the account since it was opened. Such records would be necessary evidence in any attempt to collect from a consumer who failed to pay as agreed. A legitimate debt collection attempt would be based on these business records. Yet, former employees who worked for JPMorgan Chase described the consumer credit card collections as “total disorganization”, “a mess”, and “in disarray”.
According to the lawsuit, this did not keep JPMorgan Chase from vigorously pursuing consumers to collect on accounts that it could not verify due to a lack of, or a complete absence of, proper records and documents to verify the claims being collected. Also, according the lawsuit, JPMorgan’s record keeping systems were severely outdated and internally inconsistent. There were frequent and substantial breakdowns in the collections process. Some of these breakdowns resulted, for example, in late fees being added to accounts after JPMorgan Chase had closed the account. The company also placed unrealistic collection quotas on its collection staff and fired employees who did not meet these unrealistic quotas. This led to rushed and sloppy attempts to collect on accounts that could not be verified and even barred from collection attempts by Mississippi’s statute of limitations.
According to the lawsuit, JPMorgan Chase acquired an $8.2 billion credit card portfolio from credit card issuer Providian in 2002. The company also acquired Bank One which held $1.8 billion in credit card debt from now defunct retailer, Circuit City. In 2008, JPMorgan Chase acquired Washington Mutual including $10.6 billion in credit card receivables. These accounts were not properly documented with the amounts owed and with proper payment histories and other necessary documentation. In spite of these serious deficiencies, JPMorgan Chase mounted a vigorous campaign to collect on these accounts.
Part of that campaign included filing debt collection lawsuits against consumers. According to the lawsuit, JPMorgan Chase hired the Louisiana law firm of Couch, Conville & Blitt, LLC and placed thousands of allegedly defaulted credit card accounts with this firm. The firm operated in Mississippi from an office location in Hattiesburg, Mississippi. Even though this law firm spent very little time and resources investigating the “debts” they were hired to collect, the firm sent demand letters to consumers and filed between 400 and 500 lawsuits pertaining to the accounts it had gotten from JPMorgan Chase. These lawsuits were not supported by any documentation. Instead, the law firm would file a “Request for Admissions” asking the consumer to admit that the debt was owed. Couch, Conville & Blitt relied on the fact that many consumers would not have the time, knowledge, or capacity to respond to the lawsuit. This would allow the law firm to obtain “default” judgments against these consumers with very little judicial oversight. Armed with the “default” judgment, Couch, Conville & Blitt would then be in a position to garnish wages and bank accounts and attempt to seize other non-exempt assets from the consumer. If a consumer did contest the lawsuit, the firm would usually drop the matter because there was either no supporting evidence or insufficient evidence to support the “debt” they were collecting.
Another area of misconduct involved so-called “robo-signed” affidavits. Frequently, in legitimate debt collection lawsuits, an affidavit is given which establishes the amount and/or the validity of the debt being collected in the collection lawsuit. Such an affidavit is usually signed by a person who has firsthand knowledge of the debt and the amount of the debt. Indeed, under Mississippi law, such affidavits MUST be signed by a person with firsthand knowledge of the validity and amount of the debt or by a person closely connected to the person with firsthand knowledge. However, JPMorgan Chase relied heavily on “robo-signed” affidavits. This occurs where mass quantities of affidavits, often hundreds at a time, are signed by persons who have no firsthand knowledge of the validity or amount of the “debt” and no way to know if any debt is actually owed or how much, if anything, is actually owed. These “robo-signed” affidavits were then used in debt collection lawsuits to convince the courts that the “debt” being sued for was legitimate and the amount claimed was actually owed.
Yet another area of misconduct involved JPMorgan Chase selling “charged-off” credit card accounts to others for pennies on the dollar and knowing that the buyer of this “debt” would take collection action against the consumer. No attempt was made to verify these accounts and often there was no account documentation such as card member agreements or account statements provided to the buyer of the accounts. In some instances, JPMorgan Chase continued to attempt to collect on accounts it had sold to others. The suit alleges that in at least one instance, JPMorgan Chase sold a group of accounts that had been discharged in bankruptcy. Such accounts would be completely worthless because a debt discharged in bankruptcy is legally and permanently eliminated. And the Bankruptcy Code makes it unlawful to merely attempt to collect on discharged debts. Yet JPMorgan Chase knew that the buyers of this discharged “debt” would pursue collection activity against consumers. The selling of charged-off accounts constituted 25% of JPMorgan Chase’s credit card debt recovery. According to Mississippi’s lawsuit, from 2009 to 2011, JPMorgan Chase charged off more than $20 billion in consumer credit card accounts this way. So, even at pennies on the dollar, this activity allowed JPMorgan Chase to reap hundreds of millions of dollars in revenue.
Mississippi’s lawsuit cites individual instances of the harm all of JPMorgan Chase’s misconduct has caused for consumers in Mississippi. In one case JPMorgan Chase kept calling a consumer about a “debt” the consumer didn’t owe and would not explain how they calculated the “debt”. In another case, a consumer paid a debt the consumer didn’t believe was owed just to stop the collection harassment. One consumer sent documentation proving the “debt” being collected had been discharged in bankruptcy; however, JPMorgan Chase continued collection attempts anyway. Another consumer was being called six or seven times a day on an account that was paid online and never late. In another instance, JPMorgan Chase was attempting to collect from a consumer who had never had a JPMorgan Chase credit card.
It will be interesting to see how this case develops over the coming months. I will be following this case and blogging about the major developments in future posts.
If you are a victim of any of the misconduct discussed in this post by JPMorgan Chase or any other company, we can help you. If you are being sued for a “debt” that has already been paid or settled, or that you never owed, or that was eliminated in a bankruptcy case, you should not ignore it. Mississippi’s lawsuit discussed above will not protect you in any such case. To properly protect your rights, you need an experienced and competent consumer protection lawyer. Our lawyers have decades of experience protecting consumers from collection methods like those identified in Mississippi’s lawsuit against JPMorgan Chase. We would be happy to discuss your situation with you in a private and confidential consultation. Your first meeting with us is free of charge and will give us an opportunity to review your situation and determine the best way to defend you against unlawful debt collection attempts.