In a move that mirrors that JPMorgan Chase’s dramatic freeze on credit card debt sales activities, sources close to Wells Fargo are saying that it too has chosen to halt sales of credit card debt to third-party collection agencies.
Our Miami consumer rights lawyers understand the decision comes at a time when federal oversight agencies are flexing their regulatory muscles regarding bank collections.
While JPMorgan was receiving pressure that was pointed and direct, Wells Fargo is said to be acting preemptively in reviewing its policies and procedures. This would suggest the bank’s administrators recognize that some untoward activity is going on and that an unprompted internal review might result in a less significant fine if the government later discovers it.
Unnamed internal sources have told media sources that the financial giant is examining the process through which defaulted credit card loans are sold, the companies to which those collection rights are sold and what information is provided to those companies.
While a Wells Fargo spokeswoman declined to comment about it on the record, she did say that the bank was working with regulators to adjust its practices as the laws on the issue evolve.
Compared to JPMorgan, Wells Fargo has a relatively small credit card operation. Top executives at the bank have revealed they intend to put efforts into growing this portion of the business. However, expansion could be costly if it’s not done right and, presumably, Wells Fargo knows it. Given the kind of sanctions JPMorgan is facing, it’s likely Wells Fargo is going to do everything possible to try to avoid similar pitfalls for its expanded model.
For example, JPMorgan is not only facing federal action but also a lawsuit filed by California’s attorney general in relation to credit card collection practices that were reportedly faulty. Since 2010, the money that JPMorgan makes from credit card debt collections has fallen by nearly $600 million, or more than 40 percent. That doesn’t account for whatever the firm may have to pay if regulators determine that it broke certain consumer protection laws in the course of collecting credit card debt or even just in selling it.
Most banks with credit card arms seek to recover defaulted debt by either filing lawsuits against delinquent borrowers or selling that debt to a third-party. However, there are now substantial questions about whether those debts are adequately verified before they are either taken to court or sold. In a large number of cases, it is alleged that bankers are “robo-signing” on collections, similar to what mortgage servicers were accused of doing in the midst of the housing crisis.
Without being able to verify that debt – ie., who owes the money, what the money was for and how much is owed, when the debt was racked up – it means that banks and third-party collectors should not be able to collect. The problem is that many people don’t assert their rights in forcing the banks and collectors to prove the debt. But banks and third-party collectors are still overwhelmingly successful in court cases because borrowers rarely choose to fight back, and the banks and collections agencies win default judgments.
This year, Florida, a state that has always had a busy debt-collection docket, has since seen a marked tapering off of such cases, as firms like Wells Fargo and JPMorgan are taking a closer look at their practices.
If you’re battling foreclosure or debt litigation in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.
Wells Fargo Halts Card Debt Sales as Scrutiny Mounts, July 28, 2013, By Maria Aspan, American Banker
More Blog Entries:
Debt Collection Complaint Process Expanded by CFPB, July 25, 2013, Miami Consumer Rights Lawyer Blog