Remember that time we predicted that Wall Street might have used robo-signed documents to sue consumers for uncollected debts, even though they were up to date on their credit card payments? Well, it turns out we were right or at least it looks that way at the moment.
This week, the Office of the Comptroller of the Currency (OCC) launched a full investigation into the methods Chase used to process delinquent credit card debt over the last two years. American Banker, the source that first reported the suspicious happenings at JPMorgan Chase, broke the news on Tuesday in the first of a series of articles set to explore how delinquent credit card payments have fallen victim to the same scandal that struck the foreclosure industry.
The trouble all started two years ago, when several of Chases debt collection lawsuits were thrown out of state courts due to faulty, sometimes fraudulent paperwork. After it became apparent that some sort of shortcuts were being taken in Chases back office, the OCC ordered the financial giant to stop suing customers for delinquent accounts until it got itself sorted out. Then things got interesting. Instead of freezing their collection division, Chase decided to shut it down completely. This raised suspicion that the banks debt-collecting woes werent limited to a few missed credit card payments. In turn, financial experts began to suspect that robo-signing might be going on.
Robo-signing, if you arent in the know, is the practice of using a single bank employee to sign thousands of legal documents regarding delinquent accounts without allowing that person to verify the contents first. Its similar to the way robots are used to perform one menial task on an assembly line. While this method of authentication turbocharges the collection process, its also incredibly illegal which is why the foreclosure industry got in so much trouble when their banks were caught doing it.
This presents a problem for Chase, because now reports are pouring in from numerous current and former Chase employees verifying that robo-signing indeed went on in their offices. American Banker interviewed seven of them for their article and found that everyone said the same things that former debt division overseer Howard Hardin did: We did not verify a single [affidavit] We were told [by superiors] Were in a hurry. Go ahead and sign them. Further investigations into the case have revealed that Chase manipulated faulty computer systems, employed unreliable outhouse attorneys and smudged records in order to maximize their margins.
As a result, the OCC is in position to open Pandoras box on Wall Street. Not only does this scandal call into question the billions of dollars that Chase collected from its debt-ridden customers before the news broke, it suggests that the corruption could be industry-wide as was the case with foreclosures. While we wont know just how deep the rabbit hole goes until the OCC wraps up its investigation, you can be sure that things are going to be shaken up in the financial sector in the near future.