The state of California has filed suit against JPMorgan Chase, alleging the bank used illegal shortcuts when it came to thousands of debt collection lawsuits. According to the lawsuit, filed May 9, 2013, the bank circumvented California law in the name of saving time and money to collect debt held by tens of thousands of credit borrowers.
Among those alleged shortcuts was a tactic called "robo-signing," a practice once rampant in mortgage foreclosures before it was outlawed. Debt lawsuits require signed affidavits from the entity that holds the debt before it can get default judgments and garnish wages, swearing that it has reviewed proper documents and is sure the claim is accurate. However, these reviews are time-consuming -- and, JPMorgan Chase, the lawsuit alleges, had employees sign off on thousands of cases without doing the required research.
That glut of cases, according to the suit, "flooded California's courts with collection lawsuits" against credit borrowers and took advantage of the fact that borrowers "would lack the resources or legal sophistication to call [the bank's] bluff."
This case isn't the first time robo-signing debt lawsuits has been criticized. Courts, regulators and consumer advocates have become increasingly skeptical of robo-signed credit card debt paperwork.
To learn more about how robo-signing works -- and how it can harm borrowers -- use the interactive graphic below.
We encourage an active and insightful conversation among our users. Please help us keep our community civil and respectful. For your safety, do not disclose confidential or personal information such as bank account numbers or social security numbers. Anything you post may be disclosed, published, transmitted or reused.
If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.
The editorial content on CreditCards.com is not sponsored by any bank or credit card issuer. The journalists in the editorial department are separate from the company's business operations. The comments posted below are not provided, reviewed or approved by any company mentioned in our editorial content. Additionally, any companies mentioned in the content do not assume responsibility to ensure that all posts and/or questions are answered.
Did you like this story? Then sign up for CreditCards.com’s weekly e-newsletter for the latest news, advice, articles and tips. It's FREE. Once a week you will receive the top credit card industry news in your inbox. Sign up now!