Chase Consent Order Has Broad Impact on Debt Collection Industry

Don Maurice

JPMorgan Chase Bank, N.A. and certain of its affiliates Thursday entered into a sweeping consent order with the U.S. Office of the Comptroller of the Currency covering its practices for collecting debt, as well as the practices used by its third-party service providers, including collection attorneys.

According to the consent order (available here), the bank, among other things:

• caused affidavits to be filed in court where the affiant did not have personal knowledge of the assertions made or had reviewed the relevant books and records;

• allowed the filing of “inaccurate sworn documents” that resulted in judgments with financial errors in favor of the bank; and

• failed to “sufficiently oversee outside counsel and other third-party providers” who handled its sworn documents and collections litigation.

[EDITOR’S NOTE: Because of the substantial topics covered by the consent order and its impact upon the collections industry, Maurice & Needleman and insideARM.com are teaming up on a webinar on Friday, September 27, “Assessing the Impact of the JP Morgan Chase Consent Order – Today and Tomorrow.” The webinar will be free. More information is below, or simply register right now.]

Concerning Outside Law Firms

The consent order imposes certain requirements upon the bank, which will impact its collections litigation and the practices of its outside collections litigation counsel. Among those requirements are that the bank establish:

• a plan ensuring that sworn documents and collections litigation, whether performed by the bank or its outside law firms, comply with all applicable federal and state laws, rules, regulations, court orders and attorney ethics requirements;

• continued training concerning these legal requirements for the employees of the bank, collection agencies and the outside law firms engaged in collections litigation on at least an annual basis, for new hires and after policies and procedures are updated;

• policies that allow the bank “appropriate oversight” of its collection agencies and outside law firms to ensure they comply with applicable law;

• policies and procedures for the bank’s due diligence exams of its existing and potential law firms and collection agencies concerning their “qualifications, expertise, capacity, reputation, complaints, information security” and training, among other things.

Concerning the Bank’s Debt Sales

The consent order requires the bank to revise its policies concerning its sales of charged-off consumer debt. Among the requirements imposed by the consent order are the creation of policies that ensure:

• the accuracy and integrity of “all information” provided to the purchaser;

• the information provided to debt buyers is sufficient and appropriate for compliant debt collection activities;

• debt buyers can receive additional information concerning purchased accounts when necessary, “such as during litigation;”

• the bank engages in initial and ongoing due diligence of the purchasers of the banks charged-off accounts, “including an evaluation of the debt buyers’ past performance with respect to consumer protection and debt collection laws;”

• the bank has a “thorough understanding” of the “scope of debt buyers anticipated debt collection activities;” and

• the bank implements a system that monitors complaints and “any allegations of adverse treatment” by debt buyers.

Chase’s Response

JPMorgan Chase issued a press release Thursday noting that the issues identified in the consent order “were discovered by Chase in internal reviews that began in 2010.” Chase stated that it had stopped filing credit card collection litigation in 2011 and has not restarted the process. The bank noted that less than 1% of its customers were impacted.

“Any mistake is regrettable and does not reflect the high standards we set for ourselves and our commitment to providing all customers an outstanding experience. We are committed to fixing this and getting it right,” the Bank said in its release.

In addition to ceasing credit card collection lawsuits, the Bank reported that it dismissed the impacted lawsuits.

Impact on the Collections Industry

The consent order touches on many areas of the collection industry and will likely serve as a blueprint for future enforcement actions. Because of the substantial topics covered by the consent order and its impact upon the collections industry, Maurice & Needleman will follow-up with a webinar on Friday, September 27, “Assessing the Impact of the JP Morgan Chase Consent Order – Today and Tomorrow.”

We’ve teamed up with our friends here at InsideARM to put together a panel of attorneys known for their knowledge and understanding of consumer financial protection law:

Manny Newburger – Barron & Newburger, P.C.

Joann Needleman – Maurice & Needleman, P.C.

Donald Maurice – Maurice & Needleman, P.C.

The panel will be moderated by Mike Bevel of InsideARM.

The webinar begins at 2 p.m. You can register by clicking here.