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JPM Chase Quietly Halts Suits Over Consumer Debts

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  • JPM Chase Quietly Halts Suits Over Consumer Debts

    JAN 10, 2012

    JPM Chase Quietly Halts Suits Over Consumer Debts
    JPMorgan Chase & Co. has quietly ceased filing lawsuits to collect consumer debts around the nation, dismissing in-house attorneys and virtually shutting down a collections machine that as recently as nine months ago was racking up hundreds of millions of dollars in monthly judgments.

    A sampling of court records in the major cities in five states shows that Chase collection suits have virtually disappeared. In a sixth state, Illinois, contract attorneys continue to file small-dollar cases, though at a reduced rate.

    It is unclear whether Chase has stopped pursuing collection on many claims nationwide, or if intends to pursue the debts in some other fashion. The bank has not explained its apparent moratorium and declined comment.

    Chase's halt does, however, follow scattered defeats in state courts and a whistle-blower's allegation that it falsely overstated the balances of thousands of delinquent accounts it sold to a third party. Former Chase employees and debt collection experts insist that the bank would not have abruptly retreated from its collections efforts in the absence of trouble.

    In a sign that Chase acted with urgency, numerous regional collections teams were fired in mid-2011 at the order of the New York bank's headquarters, according to people familiar with the events.

    "Nobody told anybody anything. It was very traumatic," says a former Chase attorney who asked to remain anonymous because of a nondisclosure agreement. "I think there were investigations by the [Office of the Comptroller of the Currency] and other government entities. If we're not there, we can't be interviewed."

    The OCC declined to comment. Chase declined to say whether its moves were related to government investigations or legal concerns. In an email to American Banker, a spokesman for the bank called its collection strategy "proprietary."

    Chase and other credit card issuers have historically filed lawsuits to compel consumers to repay defaulted loans. Such suits typically involve only a few thousand dollars each, but en masse add up; Chase recovered $1.4 billion from defaulted credit card accounts last year, according to its financial filings with the Securities and Exchange Commission. (Not all of that necessarily came from judgments.)

    Jerry Salzberg, a lawyer who represents debt collectors and banks in the Chicago area, was familiar with Chase's dismissed Illinois collections attorneys, whom he describes as experienced, productive and profitable.

    "Someone from New York brought in the three lawyers, kicked them out with no warning and dismissed all their cases," Salzberg says. "These were people who were by the book. … If they weren't the most profitable [of Chase's regional collection teams], they sure as hell were making a lot of money for the bank. … Obviously something happened."

    Chase collections cases have dropped off sharply in Illinois in recent months, in addition to disappearing in five other states, an American Banker review indicates. The review focused on California, Florida Maryland, New York and Washington, where local court records are electronically searchable.

    In Dade County, Florida, which includes Miami, Chase filed 640 collections claims in January 2011, most seeking between $3,000 and $12,000. On Jan. 4 alone it filed suits seeking over $200,000, which represents a rate of $50 million annually.

    But in April of last year, Chase ceased filing claims altogether in Dade County. That month, The Wall Street Journal first reported that Chase had dropped "more than a thousand" consumer debt cases around the country. Some contract attorneys cited documentation irregularities for the move, the paper reported.

    Robo-signing, or the high-volume production of signed legal documents, has been a key element of the governmental and media foreclosure reviews. Chase's current pullback raises at least the possibility that at least some banks may have documentation problems in other business lines.

    Academics and attorneys who defend consumers against debt claims have leveled their heaviest criticism at collection agencies rather than banks themselves. The agencies allegedly seek on a regular basis to collect debts in the absence of legitimate documentation. Efforts to collect a bank's own debt generally have been regarded by consumer advocates as more credible than those by collections agencies, which pursue secondhand claims.

    "If sloppy record keeping and problems with false affidavits is a problem with mortgages, it's 100 times bigger in credit card accounts," says Michelle Weinberg of the Legal Assistance Foundation of Metropolitan Chicago. Even so, Weinberg says, "On documentation issues, it wouldn't occur to me that Chase wouldn't be able to prove up its own account."

    So far judges have questioned the validity of banks' own consumer debt records in only a few low-profile cases. However, a whistle-blower claim settled last year raises further questions.

    Linda Almonte, a former team leader in Chase's San Antonio credit card services division, accused the bank of firing her for objecting to the sale of $200 million in legal judgments obtained by bank attorneys. Half the accounts lacked adequate documentation of judgment and one-sixth listed the wrong amounts owed, Almonte claimed in a suit filed in U.S. District Court for the Western District of Texas.

    In its response, Chase did not dispute inaccuracies in the debt balances and documentation. Instead, it said its sales agreement allowed for errors and thus was proper. "[T]he parties explicitly agreed that the judgments were purchased 'as is' and "with all faults," Chase's attorney wrote.

    Chase was unsuccessful in getting the case dismissed and settled it on undisclosed terms last April; it ceased filing new consumer debt lawsuits in many states the same month.

    Should Chase stop pursuing such claims for any reason, the move could prove costly. The threat of litigation has an unquantifiable but significant influence on consumers' decisions to pay off their debts. What's more, even partial recoveries can be substantial and may already be declining as the result of Chase's pullback. After recouping $405 million in the first quarter of 2011, Chase's recoveries fell to $321 million in the second quarter and $266 million in the third quarter.

    It is hard to say whether the absence of new suits has contributed to the decline. Credit card recoveries tend to be volatile and lag writeoffs. In the absence of its own collections activities, Chase could also be recouping money selling delinquent loans to collections agencies who then seek recoveries on their own. But a search for defendants in 10 cases that Chase dropped this spring did not uncover any surrogate claims.

    Next: A review of legal challenges in the consumer debt buying industry — and how banks can protect themselves from reputational and legal risks.

    http://www.americanbanker.com/issues...nopagination=1
    Last edited by catleg; 01-17-2012, 12:15 PM. Reason: formatting
    filed chapter 13..confirmed...converted to chapter 7...DISCHARGED!

  • #2
    If I had to guess, I would say that people fighting back lawsuits by actually filing a written response to the lawsuit and dragging it out untily they could file bankruptcy have made it far less profitable than it once was.

    The rise of consumer-friendly forums like BKForum have made it more and more difficult for debt collectors.

    The consumer now has access to information that was once difficult if not impossible to find.
    The world's simplest C & D Letter:
    "I demand that you cease and desist from any communication with me."
    Notice that I never actually mention or acknowledge the debt in my letter.

    Comment


    • #3
      there has to be something they are not telling us????
      8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

      Comment


      • #4
        Most likely, Chase was caught falsifying records/affidavits for accounts that originated with companies they bought out such as Washington Mutual, First USA, Providian, and so on. When a company goes through multiple mergers, records are bound to be lost or deleted. Selling an account to a junk debt buyer does not absolve the original creditor from responsibility for any false documentation which they may have provided.

        Also, it is not clear that filing lawsuits en masse against delinquent debtors is going to be a successful strategy in a new economy where there is high turnover in employment, and most people either don't own their home, or owe more than it's worth. Most people have either filed for bankruptcy, plan on filing for bankruptcy, or have nothing to lose if they don't file for bankruptcy. Either way, the judgement is never paid.

        Comment


        • #5
          all i know, and, although this article is dealing with consumer debt is they haven't made a move on our mortgage in 4 years, we have a feeling it's to do with the paperwork. we aren't going to press it either they can have the house, with the mold, flooding, leaks, cracked fountation..no problem!
          8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

          Comment


          • #6
            A picture is worth a thousand words

            The essence of freedom is the proper limitation of Government

            Comment


            • #7
              Originally posted by banca rotta View Post
              A picture is worth a thousand words

              whooooooo, now that's hot!
              8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

              Comment


              • #8
                Thank you Catleg for this article. This explains why Chase just in the last two weeks began calling us again themselves, instead of the collector, Allied International Credit Corp. Just today we got an offer of settlement from Chase via UPS Next Day Air offering to settle for 20% of the original debt. I have always maintained with Chase that this debt that they still call a mortgage debt is a personal unsecured line of credit and not tied to any property (there are no liens.) I received this line of credit 15+ years ago in the age of freely distributed and unsolicited credit lines, with no signature on any documents. Not until I stopped paying it did they claim that it was tied to my current property. Kind of funny that I've lived 3 different places since the account was originally opened, but they claim that the debt is always attached to the real estate that I own. I know that if they try to enforce a lien of any kind, they won't be able to produce any documents to support the filing. I'll bet these are the kinds of problems that they have found when filing some of their consumer lawsuits.

                Comment


                • #9
                  Originally posted by azdebtor View Post
                  Thank you Catleg for this article. This explains why Chase just in the last two weeks began calling us again themselves, instead of the collector, Allied International Credit Corp. Just today we got an offer of settlement from Chase via UPS Next Day Air offering to settle for 20% of the original debt. I have always maintained with Chase that this debt that they still call a mortgage debt is a personal unsecured line of credit and not tied to any property (there are no liens.) I received this line of credit 15+ years ago in the age of freely distributed and unsolicited credit lines, with no signature on any documents. Not until I stopped paying it did they claim that it was tied to my current property. Kind of funny that I've lived 3 different places since the account was originally opened, but they claim that the debt is always attached to the real estate that I own. I know that if they try to enforce a lien of any kind, they won't be able to produce any documents to support the filing. I'll bet these are the kinds of problems that they have found when filing some of their consumer lawsuits.
                  If they ever get tough and attempt to enforce such a claim, and you have 15 years of history, have them produce the paperwork that says this. I have never heard of such a line of credit. Was it a CC? If a mortgage of any kind, your signature would be there. I remember the day when I got working cards un-asked for in the mail. Most I cut up. Then due to stolen mail the government made unsolicited working cards unavailable. 'Hub
                  If I knew it all, would I be here?? Hang in there = Retained attorney 8-06, Filed 12-28-07, Discharge 8-13-08, Finally CLOSED 11-3-09, 3-31-10 AP Dismissed, Informed by incompetent lawyer of CLOSED status, October 14, 2010.

                  Comment


                  • #10
                    hub, yes, i had one of those, and they called them "lines of credit" with both chase and boa....neither secured by our home. one had a line of 25k the other was 60k. you had a CC, but you had a check book as well. i can't recall if i signed on the dotted line, as i have signed so many dotted lines in my lifetime i have lost track!!
                    8/4/2008 MAKE SURE AND VISIT Tobee's Blogs! http://www.bkforum.com/blog.php?32727-tobee43 and all are welcome to bk forum's Florida State Questions and Answers on BK http://www.bkforum.com/group.php?groupid=9

                    Comment


                    • #11
                      Hub, this was not a credit card, only a checkbook with a $10500 line available. The rate was pegged to one of the benchmarks and I don't believe it ever rose above 10% and stayed mostly under 8%. It was the strangest credit account I ever got because unlike the unsolicited credit cards I also received in the mail (which I did take advantage of) this was only a checkbook welcoming me to my new line of credit, no questions asked. I never had contact with Chase on this account at all. Ah, I remember the good old 1990's when I had "Gold credit", bought commercial vehicles on my signature, and everyone and their brother gave away credit. I knew it would all come to an end someday.

                      Comment


                      • #12
                        I used to have a couple of those old "signature" credit lines.
                        Seems like they became less common after about 2000.
                        Probably because then everything switched over to easy Heloc's.
                        But in the 80's and 90's they were "common".
                        I used to have one from MBNA, that I can remember.
                        Used to have very high limit "checking plus" over draft lines from Citi as well, basically the same thing.
                        filed chapter 13..confirmed...converted to chapter 7...DISCHARGED!

                        Comment


                        • #13
                          We have two Chase cards, so far they have been very quiet with their collection process, although we are only 60 days behind at this point. I am certainly not looking forward to what may happen at 90 days, but this thread as eased my anticipation somewhat.

                          Comment


                          • #14
                            I owe them over 23k from one of their cc. I stopped paying on the account over three years ago. Not a peep lately.

                            Comment


                            • #15
                              Originally posted by jacko View Post
                              I owe them over 23k from one of their cc. I stopped paying on the account over three years ago. Not a peep lately.
                              Have you filed? If so, by law you should not hear from them or anyone. 'Hub
                              If I knew it all, would I be here?? Hang in there = Retained attorney 8-06, Filed 12-28-07, Discharge 8-13-08, Finally CLOSED 11-3-09, 3-31-10 AP Dismissed, Informed by incompetent lawyer of CLOSED status, October 14, 2010.

                              Comment

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