Chase Drops Credit Card Lawsuits

JPMorgan Chase has all but dismantled its collection department over the past several months by ceasing to file lawsuits in the effort to collect consumer debts in addition to terminating the employment of bank personnel that were involved in recovering such debts. According to American Banker, last year Chase dismissed "numerous regional collections teams."

Chase has not disclosed why it is withdrawing the suits against in-debt credit card customers, but the move happens to follow on the heels of several rulings in state courts that hold in question the validity of the credit card claims of many banks. There was even a federal whistle-blower complaint last year, filed by a former JPMorgan vice president whose job it was to sell overdue credit card loans. The complaint, made by former executive Linda Almonte, alleges that Chase bank employees robo-signed the paperwork that was used to seek legal judgments against in-debt credit card users.

Robo-signing is when signed legal documents are produced at high-volume and it has been central to last year´s foreclosure scandal wherein many homeowners were being illegally evicted via robo-signed documents.

Almonte asserts that a number of JPMorgan account holders had less debt on their cards than claimed by the company and that, in fact, some of the customers facing legal action had paid down the entirety of their credit card obligations. She goes on to claim that she was fired upon notifying the bank that key legal documents required to sell off the credit card debt were missing. JPMorgan settled Almont´s suit.

Currently, JPMorgan has abandoned efforts to collect past-due credit card debt in six states which include New York, Florida, Washington, California, Maryland and Illinois, according to American Banker.The company has backed off from over 1,000 lawsuits nationwide that existed for the purpose of collecting their due on delinquent loans.

Should it come to light that sloppy, erroneous or blatantly fraudulent paperwork is what prompted JPMorgan Chase´s move, it could have humongous repercussions upon the entire financial industry. Some experts already hold the belief that robo-signing may be a practice that is widely prevalentin credit-card collections.

Lauren Palmer

Lauren Palmer is a freelance writer who is a regular contributor to a variety of online and print publications. Although she has much to say about many subjects, she specializes in topics pertaining to personal finance. She holds a bachelor’s degree from NYU in journalism.