Debt collectors don't have a reputation for being benevolent or even particularly all that fair with people.
But those employed by JP Morgan Chase, apparently, were committing illegal collection abuses against tens of thousands of consumers just in California alone, where the state attorney general has filed suit against the country's largest bank. It's been alleged that there have been thousands of "questionable" lawsuits filed by firm. That litigation is believed to have been plagued with the same kind of inaccuracy issues that dogged the foreclosure industry in the robo-signing scandal.
Our Birmingham bankruptcy lawyers know that this is far from the end of the road. The same practices that were prevalent in California have unquestionably been occurring elsewhere as well, including Alabama. It's just that many other states have been slow to launch investigations regarding the complaints that have been pouring in.
But we can catch a glimpse of what's been happening by peering into the plight of California borrowers. According to the state lawsuit, for a period of more than three years, starting in January of 2008, the bank filed thousands of lawsuits each and every month for unpaid credit card debt. Court records show that in a single day, the bank filed nearly 470 lawsuits in the state.
Of course, some of those cases were probably legitimate. Many people were suffering in the wake of the financial crisis, and a lot undoubtedly fell behind on their card payments.
The issues, however, was that JPMorgan reportedly took a series of shortcuts in filing these cases, primarily by relying heavily on court documents that weren't reviewed for assurances that the records were correct.
The banking giant seemed more concerned with maintaining speed than maintaining accuracy. In the end, the state attorney general indicates that this resulted in a kind of debt collection mill, which overwhelmed the state courts with some 100,000 lawsuits. The goal, it seems, was to obtain quick judgments before consumers could muster the resources to fight back. In doing this, banks could establish a wage garnishment procedure and consumers would have no choice but to pay.
A lot of those lawsuits relied on records that were incomplete or erroneous. In some cases, mirroring similarities to the housing debacle, lower level workers were signing off on documents as if they were bank officers or assistant treasurers. That's a form of fraud.
The bank was also allegedly careless with the credit card numbers of consumers, leaving them vulnerable to identity theft.
And on top of all that, the bank didn't bother to notify some customers that they were being sued. This is known in the legal world as "sewer service litigation."
A company spokesman said the firm halted all credit card litigation back at the beginning of 2011, following complaints that prompted an internal review of collection practices.
The company has approximately 60 million credit card holders across the country.
Truly, JPMorgan should have known better, considering it was one of the five banks that just last year agreed to a $25 billion settlement for its part in using incomplete or fraudulent documentation to wrongly foreclose on homes across the country.
Consumer advocates say this litigation in California was long overdue.
We suspect we'll continue to see similar actions as the allegations continue to pile up, and as banks work aggressively to collect on old debts that consumers incurred in the midst of the financial downturn. Meanwhile, it's likely that a number of financial institutions are using these same shortcuts, and as a result trampling on the rights of consumers.