Government Probe of Chase Bank's Debt Collection Practices, Part II

American Banker has released the second part of its three-part series covering the government’s probing of Chase Bank’s debt collection practices.

(See also Jerry Ashton’s blog post, Lying Down with Big Dogs: JPMorgan Chase.)

Part two appears to be more of a retrospective of the Linda Almonte case, giving additional color to some of the alleged shadier practices Chase Bank implemented.

The whole story is worth reading; however, if you’re short on time, here are some highlights:

• Linda Almonte’s charges against Chase included: failure to reconcile the inconsistent past-due balances generated by the bank’s computer systems; pressure from management to collect delinquent debts even in the absence of complete or accurate records; and robosigning of affidavits that brings into question the legal integrity of Chase’s claims against tens of thousands of consumers.

• Almonte’s allegations — all corroborated, according to Almonte — have forced Chase to cease operations in a collections unit that had previously generated billions of dollars in annual revenues.

• While Chase did not participate in American Banker‘s initial story, they later released a statement: “Following issues raised with mortgage documents, we conducted an internal review across the firm and found other procedural issues. We immediately alerted our regulators and worked to address them.” With its delinquent credit card customers, Chase added that in the “overwhelming majority of cases” its internal review indicated it had collected the correct amounts.

• In court, Chase never argued with Almonte over her allegations. Instead, their track was to suggest that Almonte was an at-will employee and could be fired with no notice. Additionally, they suggested that they were within their rights to sell credit card accounts whose documentation was problematic or missing, as long as it informed buyers. “[T]he parties explicitly agreed that the judgments were purchased ‘as is’ and ‘with all faults,” Chase wrote in a brief.

• Because of Almonte’s allegations, the OCC dispatched enforcement staffers to the bank’s San Antonio facility for two months late last year as part of a still ongoing investigation, as American Banker previously reported.

• OCC-required reviews revealed that Chase’s in-house legal work was allegedly solid; however, serious problems existed elsewhere: namely, in the bank’s back-offices and with outside collections firms, which had limited access to Chase’s internal records and financial incentives to recoup as much as possible from consumers.
• “Virtually overnight, Chase mothballed a legal operation that had been producing several billion of dollars in legal judgments a year and more than $1.2 billion in recoveries. Over the next few months, Chase also fired the lead attorneys in most of its satellite offices.”