JPMorgan sued over credit card debt collecting

Bank accused of using robo-signing against 100,000 California borrowers

JPMorgan Chase has been sued by California’s top law enforcement official for allegedly flooding the state’s courts with thousands of “unlawful” suits aimed at collecting credit card debts.

The state’s attorney-general, Kamala Harris, filed suit against JPMorgan on Thursday, saying the bank “engaged in widespread, illegal robo-signing, among other unlawful practices, to commit debt-collection abuses against approximately 100,000 California credit card borrowers over at least a three-year period.” The state is seeking a $2,500 civil penalty for each violation.

The suit comes a day after JPMorgan warned of a probable enforcement action by the Federal Energy Regulatory Commission. The bank also has been hit by regulatory orders in recent months involving its $6bn “London Whale” trading loss, its mortgage business and anti-money laundering issues.

Thursday’s suit echoes the wave of foreclosure-related robo-signing accusations that engulfed big US banks, including JPMorgan, almost three years ago. The practice involves signing legal declarations and affidavits without properly reviewing the documents. In February 2012 five leading banks including JPMorgan agreed to a $25bn settlement in the case.

“Robo-signing has infected all aspects of … [JPMorgan’s] unlawful debt collection practices,” the California suit said, describing the bank’s use of robo-signing as “rampant”.

A spokesman for JPMorgan declined to comment on the suit.

The suit also accuses the bank of having its lawyers send letters to customers with allegedly defaulted credit card accounts even though “no attorney has even reviewed the consumer’s file to determine if the letter is accurate”.

These lawyers threatened to make claims on property if the debt went unpaid, the lawsuit alleges. “Despite their threat to the contrary, defendants [JPMorgan] do not place liens on the consumer’s real property,” the suit adds.

The suit alleges other improper legal practices, including failure to properly serve credit card customers with court summons and complaints, “despite filing proofs of service that declare under penalty of perjury that service was complete”.

“At nearly every stage of the collection process, defendants cut corners in the name of speed, cost savings, and their own convenience, providing only the thinnest veneer of legitimacy to their lawsuits,” the complaint says.

JPMorgan has estimated potential losses from legal disputes could rise to as much as $6bn beyond reserves it has already set aside to cover them.

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