Judging by the details of a lawsuit filed in California earlier this May, state attorney general Kamala D. Harris believes that the suits at JPMorgan Chase are just a bunch of dirty crooks. The state alleges that Chase, one of the nation’s largest banks, has been using illegal tactics to collect unpaid balances from its credit card-holding customers. It’s not the first time Chase has come under fire for unlawful practices – they’ve been hit with a slew of lawsuits in recent years, along with Visa, MasterCard and a number of other big-name lenders. But we wouldn’t want to give the impression that this is just more of the same. Each and every time a bank gets sued, it’s a special moment. These lawsuits are like snowflakes. Each one is unique and beautiful in its own way.
According to the state of California, the problems began when Chase decided to set up a “debt collection mill” in order to sue their cardholders rapidly. This system allows an entity to file an incredible number of suits for unpaid balances in a very short amount of time, but it often leans upon hasty documents that are riddled with errors. Between 2008 and 2011, Chase is alleged to have filed thousands of lawsuits, often using illegal shortcuts to get through as many as 469 in a single day. Chase “cut corners in the name of speed, cost savings, and their own convenience,” according to the complaint.
A refresher is probably in order for most readers. When a company signs legal documents without first reviewing them for accuracy, that’s robo-signing. This tactic was outlawed in 2008 after the discovery of its wide use during the foreclosure boom. Since everybody remembers the robo-signing fiasco (it was big news), there can be only one rationalization for using it today: the belief that you’re above the law.
Chase is also accused of neglecting to notify customers that they were being sued, and when personal information isn’t stripped from documents that make it into the public records, identity theft becomes a concern. The lawsuit also alleges that Chase was unwilling to do proper research on the status of its customers. For example, according to the complaint, if military cardholders weren’t on active duty, they were denied appropriate legal protections. California alleges that Chase seldom verified military status.
Here’s what Harris had to say about the whole mess: “Chase abused the judicial process and engaged in serious misconduct against California credit card borrowers.” That’s from a statement printed in the LA Times. That’s from an attorney general who stands up for her constituents.
Banks have done this stuff before. The question is whether or not this particular lawsuit will be enough to prevent similar problems in the future. What’s it going to take? It wasn’t long ago that the Department of Justice hit banks with a multibillion-dollar lawsuit for using similar practices during a frenzy of foreclosures – and Chase was right there in the mix. Incomplete and unverified documents are at the center of this lawsuit, just as they were at the center of that one. Despite AG Harris’s current vendetta, we’d be surprised if this terrible cycle of accusations and settlements has an end.
Will big banks continue to operate in the shadows of the law? Can the entire system be revised to prevent them from doing so? What can we do? Sound off in the comments below.