In addition to paying a total of $136 million to 47 participating states, the District of Columbia and the federal Consumer Financial Protection Bureau, Chase must significantly reform its collection-related business practices in such areas as supporting declarations, collections litigation, debt sales and debt buying.
Among other allegedly unfair and misleading practices, Chase was accused of employing “robo-signed” affidavits – affidavits from staffers who either had no direct knowledge of, or had not authenticated the information in, the affidavits – when creating case files against consumers it was suing in debt collection litigation.
As a result, a multi-state investigative committee alleged, affidavits supporting Chase debt collection lawsuits often contained inaccurate information regarding consumer credit balances, interest and fees. In addition, Chase made calculation errors in preparing its debt collection cases that resulted in judgments for more than consumers actually owed, and subjected consumers to collections activity on accounts that were not theirs, or were legally uncollectable.
Also, Chase allegedly engaged in inaccurate credit reporting, which had the potential to cause some consumers future difficulty in obtaining housing, employment, credit and insurance.
“This is an important settlement because it holds Chase accountable for business practices that harmed many consumers in New Jersey and across the country,” said Acting Attorney General Hoffman.
“Chase was certainly entitled to take lawful action to collect on unpaid debt. However, it appears the company pursued debt collection actions against consumers using information that was inaccurate, had been misreported, or was just plain false,” Hoffman said. “In some cases, the purported debt was inflated beyond what was owed, while in others, the debt was tied to the wrong person, already had been lawfully discharged, or was time-barred. Given the alleged conduct, it is appropriate that today’s settlement includes a requirement that Chase significantly reform its business practices.”
As of the end of 2012, Chase maintained approximately 64.5 million consumer credit accounts nationwide with $124 billion in outstanding credit debt. Between 2009 and 2013, Chase recovered approximately $4.5 billion in debt from defaulted accounts via collection lawsuits, the sale of defaulted accounts to third-party debt buyers, or both.
As part of the agreement announced today, Chase will cease all collection efforts against more than 528,000 consumers in the U.S., including more than 34,000 in New Jersey. Chase obtained judgments against those consumers between January 1, 2009 and June 30, 2014. Under the settlement, Chase will notify the impacted borrowers of its decision to halt collections activity, and will request that all three major credit reporting agencies not report the judgments obtained.
Today’s settlement also ensures that Chase will fulfill a total of $50 million in nationwide consumer restitution promised through a related, but separate, agreement reached in 2013 with the federal Office of the Comptroller of the Currency (OCC). To date, Chase has paid $2.37 million in restitution to impacted New Jersey consumers, the fifth largest statewide restitution amount paid to consumers by Chase after California ($7.90 million), New York ($5.95 million), Florida ($4.65million) and Illinois ($3.64 million).
Under today’s agreement, if Chase’s consumer restitution payouts related to the 2013 OCC settlement fall short of $50 million as of July 1, 2016, Chase must pay the remaining balance to state Attorneys General and the federal Consumer Financial Protection Bureau.
Business reforms required of Chase under today’s settlement include the implementation of new safeguards to help ensure debt information is accurate, and that inaccurate data is corrected. Chase also must provide additional information to consumers who owe debt. In addition, third-party debt-buyers who purchase consumer debt from Chase are barred from reselling it to other buyers.
The prohibition on any reselling of Chase’s consumer debt by third-party debt buyers is significant, because it will prevent the perpetuation – perhaps on multiple occasions — of consumer debt portfolio errors that could harm consumers on a long-term basis. (Chase suspended its sale of consumer credit card debt in 2013.)
Deputy Attorney General Patricia Schiripo, Assistant Section Chief of the Division of Law’s Consumer Fraud Prosecution Section, handled the Chase matter on behalf of the State.