Over half a million consumers just caught a break with help from the Consumer Financial Protection Bureau. It appears the CFPB has taken tough action against a major bank for basically screwing over consumers who were being forced to pay debt they rightfully should not have had to.
The CFPB Says…
Today the Consumer Financial Protection Bureau and Attorneys General in 47 states and the District of Columbia took action against JPMorgan Chase for selling bad credit card debt and illegally robo-signing court documents. The CFPB and states found that Chase sold “zombie debts” to third-party debt buyers, which include accounts that were inaccurate, settled, discharged in bankruptcy, not owed, or otherwise not collectible. The order requires Chase to document and confirm debts before selling them to debt buyers or filing collections lawsuits. Chase must also prohibit debt buyers from reselling debt and is barred from selling certain debts. Chase is ordered to permanently stop all attempts to collect, enforce in court, or sell more than 528,000 consumers’ accounts. Chase will pay at least $50 million in consumer refunds, $136 million in penalties and payments to the CFPB and states, and a $30 million penalty to the Office of the Comptroller of the Currency (OCC) in a related action.
“Chase sold bad credit card debt and robo-signed documents in violation of law,” said CFPB Director Richard Cordray. “Today we are ordering Chase to permanently halt collections on more than 528,000 accounts and overhaul its debt-sales practices. We will continue to be vigilant in taking action against deceptive debt sales and collections practices that exploit consumers.”
Chase Bank, USA N.A. and its subsidiary Chase BankCard Services, Inc. are based in Newark, Del. and provide consumers with credit card accounts. From 2009 to 2013, when consumers defaulted on debts, Chase attempted to collect by contacting consumers, filing collections lawsuits, and selling accounts to third-party debt buyers. When Chase sold accounts, it provided debt buyers with an electronic sale file containing certain basic information about the debts from Chase’s internal databases, which the debt buyers used to collect on the debts. Chase was also responsible for preparing affidavits to verify debts when it or its debt buyers filed lawsuits to collect on defaulted credit card debts.
The CFPB found that Chase violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibitions against unfair, deceptive, or abusive acts and practices. Chase sold faulty and false debts to third-party collectors, including accounts with unlawfully obtained judgments, inaccurate balances, and paid-off balances. Chase also sold debts that were owed by deceased borrowers. Chase also filed misleading debt-collections lawsuits against consumers using robo-signed and illegally sworn statements to obtain false or inaccurate judgments for unverified debts. Specifically, the CFPB and states found that Chase:
- Sold bad debts to third-party debt buyers: Chase sold certain accounts that had already been settled by agreement, paid in full, discharged in bankruptcy, identified as fraudulent and not owed by the debtor, subject to an agreed-upon payment plan, no longer owned by Chase, or that were otherwise no longer enforceable. Chase also sold debts with missing or erroneous information such as whether the debt had been paid and the amount owed.
- Assisted third-party debt buyers in deceptively collecting debt: By selling inaccurate or uncollectable debts, Chase subjected certain consumers to debt collection by its debt buyers on accounts that were not theirs, in amounts that were incorrect or uncollectable. Chase knew, or should have known, that third-party debt buyers would seek to collect these faulty debts. Therefore, by providing inadequate or incorrect information, Chase assisted debt buyers in deceptive collection activities.
- Robo-signed affidavits to sue consumers for unverified debt: Chase filed more than 528,000 debt collections lawsuits against consumers and provided more than 150,000 sworn statements to debt buyers for their collections lawsuits against consumers, often using robo-signed documents. In doing so, Chase systematically failed to prepare, review, and execute truthful statements as required by law. Chase also made calculation errors when filing debt collection lawsuits that sometimes resulted in judgments against consumers for incorrect amounts. Chase failed to notify consumers and the courts once it learned of these problems.
Enforcement Action
Pursuant to the Dodd-Frank Act, the CFPB has the authority to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices or that otherwise violate federal consumer financial laws. Chase suspended collections litigation in 2011 and stopped selling debts in 2013. The CFPB and state actions provide relief for injured consumers, prohibit Chase from reviving its unlawful practices, and impose penalties for Chase’s law violations. Specifically, the order requires Chase to:
- Cease collecting on 528,000 accounts: Chase cannot collect, enforce in court, sell, or transfer debts for consumers whose Chase credit card accounts were sent to collections litigation between January 1, 2009 to June 30, 2014. If Chase previously obtained a court judgment requiring consumers to pay the debt, Chase will notify the consumer that they will not try to collect, enforce, or sell the judgment. Chase will also contact the three major credit reporting companies to request that the judgments not be reported against consumers. These accounts had an original face value estimated at several billion dollars when Chase sent them to collections litigation. The actual market value is now estimated in the tens or hundreds of millions of dollars. Debt relief of this kind permanently protects consumers from any further collections and judgments on these accounts.
- Pay at least $50 million in cash redress to consumers: Chase will pay cash refunds to consumers against whom collections litigation was pending between January 1, 2009 and June 30, 2014, for amounts paid above what the consumer owed when the debt was referred for litigation, plus 25 percent of the excess amount paid.
- Prohibit debt buyers from reselling accounts: Chase must require by contract or agreement that debt buyers cannot resell debts purchased from Chase, unless to sell back to Chase.
- Confirm debt before selling to debt buyers: Chase cannot sell debts that have been paid, settled, discharged, or are otherwise uncollectable. Prior to sale, Chase must provide account-level documentation to debt buyers confirming that the debts are accurate and enforceable. For a minimum of three years after selling the debt, Chase must make certain additional account information available to debt buyers including agreements, statements, and dispute records.
- Notify consumers that their debt has been sold and make their account information available to them: Chase must notify consumers when their account is sold and reveal who purchased the account, the amount owed at the time of sale, and that consumers can request further information about their accounts at no charge.
- Not sell zombie debts and other specified debts: Chase may not sell debts that do not have the required documentation, have been charged off for over three years or where the consumer has not paid for three years, are in litigation, are owed by a servicemember, are owed by someone who is deceased, or where the debtor has a payment plan.
- Withdraw, dismiss, or terminate collections litigation: Chase will withdraw, dismiss, or terminate all pre-judgment collections litigation pending at any time after January 1, 2009.
- Stop robo-signing affidavits: Declarations must be signed by hand, must reflect the actual date of signing, and must be based on the direct knowledge of the person signing and their review of Chase’s business records. Supporting documents submitted for debt collection litigation must be actual records of the debt, verified to be accurate, and not created solely for litigation.
- Verify debts when filing a lawsuit: When filing collections lawsuits, Chase is required to submit specific information associated with the debt including the name of the creditor at the time of the last payment, the date of the last extension of credit, the date of the last payment, the amount of debt owed, and a breakdown of any post-charge-off interest and fees.
- Pay $30 million civil penalty: Chase will pay a fine for its unlawful debt sales and robo-signing practices.
Chase must also implement policies, procedures, systems, and controls to ensure compliance with federal consumer financial laws when selling and collecting debts.
The Bureau is joined by 47 states and the District of Columbia in today’s action. The Bureau also worked in coordination with the OCC, which entered into a related agreement with Chase in 2013. The total relief to consumers includes debt relief associated with halting collections on more than 528,000 consumers’ accounts and at least $50 million in refunds. The amount of penalties and payments to states includes a $30 million civil penalty paid to the CFPB, a $30 million civil penalty paid to the OCC on the related matter, and $106 million in payments to states.
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Chase Bank was playing fast and loose again, huh? I’m unhappy not only with the way these big banks have so little regard for the very real people hurt by Chase’s laissez faire attitude, but by the entire credit and debt industry, beginning with the multiplicity of credit reporting agencies and the entire absence of, and total disregard for at least some kind of internal auditing of their own records on consumers, as well as the absence of any external oversight of the entire credit reporting “industry” ( or is “racket” the word I’m looking for here?).
To me, these credit reporting agencies have the undeserved power to destroy careers and determine/destroy any and every American citizen’s quality of life with their sloppy record keeping. Why do we put up with this in our nation? How is it that credit reporting agencies are allowed to document and server once verify the truth or accuracy of whatever they do document in anyone’s credit record?
Even more curious to me is that these credit reporting agencies will flat out tell anyone who asks that, no, they do not verify what they’ve documented in a person’s credit record, unless what is documented in the person’s credit report is ever challenged. The curious part then, to me, is how extensions of credit, job offers, and even the quality of one’s neighborhood and home are based on, too often often for my comfort, information that may be, and too often is, not factual at all.
I know for a fact based on a conversation I had with a company representative working at one of The Big Three credit bureaus in which I asked where this credit bureau gets the consumer information it documents on a given individual. I was specifically told that in part, the bureaus share information about a given consumer with each other. And no, of course what information is shared is not verified unless it is challenged.
What this tells me is that because the credit bureaus do not first check the accuracy of what they document in credit reports, what they might document in someone’s credit report has the credibility of gossip; not historical truth. And yet lenders, mortgage companies, and even potential employers rely on this documented equivalent of gossip as if it were gospel truth. It’s anything but that.
And when one credit bureau gets some new gossip to document on a person from another credit bureau, and neither verify what they do both document, it leaves the person who is represented within the credit report to have to “clean up” the documented slop in their credit reports up to three times over, if all of The Big Three credit bureaus all document the same inaccuracy in the person’s credit report.
In my experience, I had to challenge an inaccuracy in my credit report documented by one of The Big Three. When that bureau removed the inaccuracy I could see some 60 days after my initial challenge to one bureau, lo and behold, while indeed the inaccuracy was gone from one of the bureaus’ credit report on me, only for me to find that now, the same inaccurate information was being reported by a different credit bureau in their version of my credit report.
And, in my experience, to think you are “safe” in only needing to check your credit report for credit bureau documenting errors just one time a year, think again.
Suppose a new job opening is listed that you really want to apply for. You check your credit reports, and find some inaccurate, very negative piece of information has been documented in your credit report; maybe in all three of your credit reports. As things stand now in challenging anything in your credit report(s), you must give the credit bureau(s) 30 days to look into the error by addressing it with the creditor allegedly associated with the stated negativity. The credit bureau, in turn, has to give the creditor 30 more days, I believe, to respond to the challenge.
OK, now possibly 60 days have gone by, and what about your hopes of securing that job opening you were interested in? If the inaccurate item in your credit report(s) was especially derogatory, and you know this new potential employer would have checked your credit report before making any hiring decision, you’re likely to think you wouldn’t have had a snowball’s chance in being selected for the job. You could have gone to an interview for the job and tried explaining the noted credit report inaccuracy to the hiring manager, but that might’ve backfired and made you look even more suspect.
Finally on my list of gripes about the credit bureaus is that, as I see it, when they encourage you to sign up for the rights to see your credit report every month to check for errors, what’s hiding in plain sight is the fact that they admit to being inaccurate in what they put in your credit report, and nobody seems to find the fact that the credit bureaus themselves are stating they do inaccurate documenting, but we all just accept that as part of the scenery associated with our dubious at best credit reporting agencies. Credit reporting agencies who think nothing of making the possibly life altering errors they do make, then offer you the opportunity to correct the credit bureaus’ goofs by selling you the right to see your credit report, so that now the credit bureaus have managed to get YOU to pay THEM for the privilege of cleaning up their sloppy, dubious, perhaps even negatively life effecting careless reporting on you.
Great, huh? A couple months ago, while I have been on Social Security Disability since 2009, all of a sudden one of the bureaus changed that fact so that it now appears per one credit bureau, that I work at my husband’s employer. Several years back, one of the bureaus decided to document me as living in a town and state I’ve never been to, and residing at a business suite address running through the main downtown area of that city, and it turns out, this one credit bureau had documented me as residing at the address of one of my creditor’s main office location. That was a fun thing to try and sort out because you know if you want access to your credit report, you must answer a series of challenge questions related to your credit or home address history, and I kept being denied access because of the one credit bureau having begun stating I had lived at such and such an address that did turn out to be the main office address of one of my creditors. It is impossible to argue facts with a computer database. Even if the computer is wrong, you have to agree and pretend it is right until you can get a human.to change the computer’s mind for it.
The net of all this is that given the degree, in my experience, to which undetected errors are being documented in records held about you, how can you take such an error-prone entity seriously when it does not verify or audit its records about your character. Also, there is no external oversight, for proofing purposes as to what is documented about you. And, if you watch the credit bureau ads on TV, marketing accessibility by you of what the credit bureau is documenting in your credit report, for a monthly fee YOU pay the CREDIT BUREAUS.
Does anyone besides me not find it, in reality, a bit absurd how these credit bureaus have worked out a way to be as careless as they want to be, and then think nothing of asking you to pay them for the privilege of accessing suspect data they’ve documented on you, know could contain errors that need resolution, but still won’t take responsibility for errors they make, and then make you pay them so you can (and you should) gain access to you report more often than once annually, to keep up with the errors so they don’t pile up. I did that once, going three years without checking my reports. When I finally did, I counted 23 total credit bureau errors.
The credit bureaus have us right where they want us…paying them for the privilege of doing their work.
High time things change. And no credit grantor should take seriously the sloppy efforts of the credit bureaus, in my opinion. Not until the bureaus get some oversight. At present they’re just loose cannons.