Consumer advocates have been warning for years that bank debt collection tactics by third-party collection agencies are unfair, deceptive and abusive.
Now, the Consumer Financial Protection Bureau (CFPB) and the attorneys general of 47 states and Washington, D.C., have filed an enforcement action against one of the largest banks in the country for allegedly unfair credit card collection tactics.
The action outlines the systematic approach the bank reportedly took in collecting debts that were unverified, inaccurate, discharged in bankruptcy or were not collectible for other reasons.
Our Miami consumer protection attorneys understand the list of alleged transgressions is long.
Among allegations made:
The bank used documents that were illegally-sworn in obtaining court judgments against some 500,000 borrowers whose debts were not verified. In those cases, people may not have had the resources to fight back, and ended up getting slapped with a default judgment – owing a debt they should never have had to pay to start. The bank issued sworn statements promising the debts were valid and accurate, but in fact, the company failed on a consistent basis to review those records and make sure those statements were truthful.
Authorities also allege the bank sold hundreds of thousands of “zombie debts” to third-party collection agencies. These were debts that were not actually collectible for a myriad of reasons. Typically, they had already been settled or they were outright inaccurate. In some cases, the borrower had filed for bankruptcy and the debt had already been discharged.
When the company became aware that this was a substantial problem, it took no action to notify either consumers or the court system that this was an issue.
As part of the enforcement action, the bank must immediately halt collection on debts that were referred to to the court system between January 2009 and June 2014. It also has to issue notification to consumers that it won’t be collecting.
Major credit bureaus should receive contact from the bank, asking that the judgments secured during that time not be counted against consumers on their credit reports.
For consumers who already paid on those “zombie debts” – about $50 million – the bank has to issue refunds.
In the future, the bank is required to inform consumers when their debt has been sold to a third-party collector and the identity of that buyer has to be made clear, as well as the amount that is owed. The consumer also needs to be told where to obtain more information for free.
Third-party collection agencies must receive detailed documentation on each account it purchases. The bank is barred from selling debts with no account information.
Of course, none of this is going to completely remedy the problem. The damage inflicted on some borrowers was devastating. Their wages were garnished. Their bank accounts were frozen. They had liens placed on their properties. They had trouble getting credit and landing employment.
In addition to the $50 million in refunds, the bank also must pay a $30 million fine to the CFPB, as well as another $106 million to be divvied up among the states that joined the action.
If you’re battling debt collection 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 Tuesday at 6 p.m. on “Debt Warriors with Bruce Jacobs and Court Keeley,” discussing foreclosure topics that matter to YOU.
CFPB, 47 States and D.C. Take Action Against JPMorgan Chase for Selling Bad Credit Card Debt and Robo-Signing Court Documents, July 8, 2015, News Release, Consumer Financial Protection Bureau
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