California Reaches $100M Settlement with JP Morgan Chase Regarding Debt Collection Practices

JP Morgan Chase, the nation’s biggest bank, will pay $100 million to settle allegations that it used illegal and abusive debt-collection practices in connection with California credit card customers.

The deal follows from a 2013 lawsuit brought against JPMorgan Chase by California Atty. Gen. Kamala Harris and parallels a national settlement over similar allegations. insideARM first reported on the California lawsuit on May 10, 2013, and wrote about the earlier national settlement on July 8, 2015.

The settlement resolves allegations that JPMorgan Chase (Chase) committed credit card debt-collection abuses against tens of thousands of Californians. The settlement specifically addresses debt collection wrongdoing that includes collecting incorrect amounts, selling bad credit card debt, and running a debt collection mill that involved illegally “robo-signing” thousands of court documents and improperly obtaining default judgments against military service members.

As part of the settlement, Chase will pay $50 million in restitution to consumers nationwide, including an estimated $10 million to California consumers, and significant restitution to service members in California, some of whom were on active duty when Chase obtained illegal default judgments against them.  Chase will also pay $50 million in penalties and other payments to California, through the Office of the Attorney General.

The court documents show that between 2009 and 2013, Chase filed more than 125,000 credit card collection lawsuits against California consumers relying on illegally robo-signed sworn documents and provided an additional 30,000 robo-signed sworn statements in support of lawsuits filed against California consumers by third-party debt collectors.  The initial lawsuit alleged that Chase also made systematic calculation errors regarding the amounts owed, and sold “zombie debts” to third-party debt collectors that included accounts that were inaccurate, settled, discharged in bankruptcy, not owed, or otherwise not collectible. (Editor’s note: A copy of the stipulation for entry of judgment can be found here. A copy of the proposed judgment can be found here.)

The settlement includes injunctive terms that will, according to the press release from Attorney General Kamala D. Harris, fundamentally change Chase’s credit card debt collection practices to prevent similar misconduct in the future. The stipulated judgment requires Chase to document and confirm debts before filing credit card collections lawsuits or selling credit card debts to debt collectors.  Chase is barred from robo-signing court and other documents, and also must prohibit debt buyers from reselling the credit card debts owed to Chase.  Chase is also barred from selling certain debts, and is required to permanently stop all attempts to collect, enforce in court, or sell more than 528,000 consumer accounts valued at hundreds of millions of dollars.

The settlement is still subject to court approval.  But, approval is expected.

insideARM Perspective

The first settlement with Chase involved the CFPB and 47 other states.  The three states that were not part of the original settlement were California, Mississippi, and Wyoming. This settlement is with the state of California only. Theoretically there is still exposure for activity in Mississippi and Wyoming.

In both the California and national settlements, Chase neither admitted nor denied wrongdoing, and the bank has said the cases target practices that the bank stopped years ago.

“The bank has been working to resolve debt collection problems over the last several years,” says Chase spokesman Paul Hartwick, as quoted in the the Los Angeles Times today. “Since 2011, the bank has not filed any credit card debt suits against customers, and it has dismissed lawsuits that were filed improperly.”