March 26, 2012

Robosigning Redux? Regulator Probes Chase Over Credit Card Collections

The Office of the Comptroller of the Currency is reportedly taking a good, hard look at the practices that credit card giant JP Morgan Chase used in its credit card collections business. American Banker has reported at length on this new "robosigning" bombshell. "The bank's errors could call into question the legitimacy of billions of dollars in outstanding claims against debtors and of legal judgments Chase has already won," it says in an article published earlier this week.

This was big business for Chase; the article says in 2009 alone, it earned more than $1.2 billion off old credit card debt. The problem was that the numbers didn't always add up. The magazine talked to current and former employees who say they were pressured to sign off on documents verifying the debts even when the amounts couldn't be confirmed.

Assistant vice president-turned-whistleblower Linda Almonte says she was fired in 2010 for raising concerns about the shoddy state of the records being sold to debt buyers. "Nearly half of the files her team sampled were missing proofs of judgment or other essential information… nearly a quarter of the files misstated how much the borrower owed," American Banker says. Most of the debts were actually lower, Almonte alleged.

Chase whistleblowers claim "robosigning," or signing off on documents without verifying the details or without the employees even reading them first, was commonplace. But even that may not have been the worst of it.

American Banker also cites whistleblower complaints that describe an ongoing, deliberate practice of destroying documents that favored debtors. "Chase shredded incoming correspondence such as records of borrower payments and counter-judgments extinguishing debts," the article says. One former employee tells the magazine about records being "trashed."

Chi Chi Wu, staff attorney at the National Consumer Law Center, says watchdog groups have long suspected that collection departments of major credit issuers operated in much the way that their counterparts in the foreclosure business did. "There's active fraud going on here," she says. "It just confirms it was more than just sloppiness."

Consumer advocates had speculated that this might have been behind Chase's abrupt and unexplained decision to drop collection lawsuits against debtors in five states last spring. "It's a significant problem… that's widespread and yet given virtually no attention," a New York judge told the Wall Street Journal at the time.

Now it's getting attention, and Chase is clearly not thrilled. It refused to comment for the American Banker article. "Following issues raised with mortgage documents, we conducted an internal review across the firm and found other procedural issues," spokesman Paul Hartwick says. He disputes whistleblower claims, saying that the bank "found that in the overwhelming majority of cases, the amount collected was correct." Hartwick would not comment on how Chase is handling situations where the amount in collections was found to be erroneous.

The OCC is similarly tight-lipped about the issue. "We are not commenting on that JPMC credit card story," Treasury spokesman Dean DeBuck said via email. American Banker cites unnamed sources who say investigators from the agency spent two months late last year at a Chase facility in Texas, gathering evidence.

Consumer advocates say the OCC owes consumers an explanation. "It's taken far too long for regulators to do something about it," Wu says. "These kinds of practices trash the credit reports for millions of consumers. It really causes them harm."

moneyland.time.com

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