–Agreement requires restitution and prevents future resales by debt buyers —
Jefferson City, Mo. – Attorney General Chris Koster today announced a national settlement with Chase Bank USA N.A. and Chase Bankcard Services Inc. to reform its unlawful credit card debt collection practices and provide relief to more than 525,000 consumers, including more than 2,400 in Missouri. The $136 million joint state-federal settlement is with attorneys general in 47 states plus the District of Columbia and the Consumer Financial Protection Bureau (CFPB). In addition to separate consumer restitution, Chase will pay $915,791 to the state of Missouri.
The agreement with the states, as well as a separate order with the CFPB, follows an investigation into Chase’s past debt-collection practices.
“Chase’s credit card debt-collection practices harmed thousands of consumers here in Missouri and across the country,” Koster said. “Chase often used wrong or outdated information to pursue debts, including debts that had already been discharged. Chase must now change its business practices and treat consumers fairly in the future.”
Koster said the investigation found Chase pursued collections cases based on information that was incorrect or even false. These include instances where the listed debt was the wrong amount, was tied to the wrong person, was discharged, or was time barred.
As part of the agreement, Chase has agreed it will not pursue collection efforts on more than 528,000 consumers, including an estimated 2,424 in Missouri. Chase had sued the affected consumers for credit card debts and obtained judgments between January 1, 2009 and June 30, 2014. Chase will notify affected borrowers of the change and will request all three major credit reporting agencies not to report the judgments.
The agreement also ensures that Chase will fulfill $50 million in consumer restitution through a separate 2013 consent order reached with the Office of the Comptroller of the Currency. Chase estimates that so far it has provided $120,000 in restitution to 115 Missouri consumers.
The agreement requires Chase to significantly reform its credit card debt-collection practices in areas of declarations, collections litigation, debt sales, and debt buying. Debt buying involves the sale of debt by creditors or other debt owners, often for pennies on the dollar, to buyers who then attempt to collect the debt at full value or sell it to other buyers.
Among other reforms, the agreement requires new safeguards to help ensure debt information is accurate and inaccurate data is corrected, provides additional information to consumers who owe debts, and bars Chase’s debt buyers from reselling consumer debts to other purchasers.
Koster said the resale prohibition is significant. Previously, initial buyers of Chase’s consumer credit card debt could resell the debt, the subsequent buyer could flip the debt to a third buyer, and the process could repeat itself many times over. Transmitting incorrect information to subsequent buyers could result in long-term harm to the consumer, who would have the difficult or even impossible burden of correcting the errors.
According to the joint state-federal probe, Chase:
- Subjected consumers to collections activity for accounts that were not theirs, in amounts that were incorrect or that were legally uncollectable.
- Subjected consumers to inaccurate credit reporting and unlawful judgments that may hurt consumers’ ability to obtain credit, employment, housing, and insurance in the future.
- Sold certain accounts to debt buyers that were inaccurate, settled, discharged in bankruptcy, not owed by the consumer, or otherwise uncollectable.
- Filed lawsuits and obtained judgments against consumers using false and deceptive affidavits and other documents that were prepared without following required procedures, a practice commonly referred to as “robo-signing.” These practices misled consumers and courts and caused consumers to pay false or incorrect debts and incur legal expenses and court fees to defend against invalid or excessive claims.
- Made calculation errors when filing debt collection lawsuits that sometimes resulted in judgments against consumers for incorrect amounts.
Chase suspended its consumer credit card debt sales in 2013 and collections litigation in 2011. In 2012, Chase maintained approximately 64.5 million open accounts with $124 billion in outstanding credit card debt. From 2009-2013, Chase recovered approximately $4.5 billion of debt from defaulted accounts through collection lawsuits, selling defaulted accounts to third-party debt buyers, or both. Koster said that while the unlawful debt-collection practices have stopped, the enforcement action holds Chase accountable for its past practices by requiring new debt-collection reforms, requiring restitution, and assuring Chase will not attempt to collect on the judgments it had obtained.
In addition, Chase must pay more than $95 million to the 47 participating states and the District of Columbia and $30 million to the CFPB. Missouri’s share, based on the number of consumers affected, is $915,791.
Koster said debt collectors are bound by state and federal laws, including the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to collect from consumers. Consumers who have complaints about unfair debt-collection actions should file a complaint with the Attorney General’s Office online or by calling 800-392-8222.