California Lawsuit over Chase's Debt Collection Practices is Still On

The California Superior Court of Los Angeles rejected a bid Tuesday by mega-bank JP Morgan Chase to dismiss a lawsuit brought in May 2013 by California Attorney General Kamala Harris alleging widespread debt collection abuses in the bank’s credit card unit.

California Superior Court Judge Jane L. Johnson rejected outright the bank’s argument that California legal authority precluded the Attorney General’s claims of unfair competition.

The lawsuit claims that from April 2008 – January 2011, JP Morgan Chase illegally tried to collect debt from about 100,000 credit card borrowers. The biggest credit card lender in the country allegedly pursued lawsuits against consumers who defaulted on their credit card debt, even though it had insufficient evidence. Chase was able to bring so many lawsuits to court because it allegedly used robo-signing to push cases forward without reviewing them first; thanks to robo-signing, the company was able to file an average of 100 suits a day. According to the complaint, Chase also sent letters to consumers demanding payment of a balance due, claiming they may be liable for attorney’s fees and threatening to garnish income and place liens on property.

“At nearly every stage of the collection process, defendants cut corners in the name of speed, cost savings and their own convenience, providing only the thinnest veneer of legitimacy to their lawsuits,” Harris said in her complaint against Chase.

The state is seeking civil penalties of $2,500 for each violation of California law and an additional $2,500 for each violation against a senior citizen or person with a disability.

The next hearing in this case is scheduled for February 10. Chase lawyer David Schrader has already indicated that he will ask the judge to certify her decision for immediate appeal to the California Court of Appeals; however, Deputy Attorney General Bernard Eskandari said he will oppose it.

This is hardly the first time JP Morgan Chase has found itself in legal hot water over its debt collection practices. In September 2013, the bank ended a long battle with the Office of the Comptroller of the Currency by agreeing to a consent order. The OCC’s charges were remarkably similar to the ones in California. Charges against Chase included failure to reconcile the inconsistent past-due balances generated by the bank’s computer systems, the collection of delinquent debts in the absence of complete or accurate records and robo-signing of affidavits that brings into question the legal integrity of Chase’s claims against tens of thousands of consumers.

These investigations, and Chase’s subsequent payout, are likely to change the practices at nearly all banks. Debt collection attorneys and debt buyers are going to feel the impact most directly. Discover how the OCC’s actions against Chase could impact all players in accounts receivable management with To the Point: The Chase Consent Order. If you are, or would ever want to be, a vendor for JP Morgan Chase, this is compliance information you need to know.