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California blasts Chase for robo-signing

Summary

California’s attorney general accused Chase Bank of using false documents in court cases to collect credit card debts

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California has accused Chase Bank of running a “massive debt collection mill” that used robo-signed documents and other illegal shortcuts to shake down 100,000 credit card holders over three years.

How robo-signing works
The state of California isn’t the first agency to question the legitimacy of using robo-signing in the process of credit card debt collection. See animation: “How robo-signing works.”

In a lawsuit filed May 9 in state court in Los Angeles — the harshest yet aimed at a bank for debt collection abuses — the state portrays Chase’s system for collecting credit card balances as rife with abuses from start to finish.

“For years, Defendants have flooded California’s courts with collection lawsuits against defaulted credit card borrowers based on patently insufficient evidence — betting that borrowers would lack the resources or legal sophistication to call Defendants’ bluff,” states the complaint filed by state Attorney General Kamala Harris against Chase Bank, its corporate parent JPMorgan Chase & Co. and Chase Bankcard Services Inc. “At nearly every stage of the collection process, Defendants have cut corners in the name of speed, cost savings, and their own convenience, providing only the thinnest veneer of legitimacy to their lawsuits.”

Chase’s warning letters to customers, its court filings, and the statements it provided to debt buyers falsely claimed to have been reviewed by attorneys or bank officers, the lawsuit said, and the amounts demanded from customers were often incorrect.

Chase representatives were not immediately available for comment.

The lawsuit comes as courts and regulators increasingly question methods used in debt collection cases. Other states are considering court reforms  to block banks and their collectors from routinely obtaining default judgments against consumers on the basis of robo-signed documents. Frequently in collection cases, sworn statements will be entered as proof of a debt instead of account records. The thin proof is usually sufficient to win a verdict because debtors rarely appear and defend their case.

California’s lawsuit seeks $2,500 from each defendant for each violation of state law, among other in penalties and costs. The lawsuit left open the possibility of charging another 100 defendants involved in the abuses who were not named in the initial filing.

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

— Lawsuit filed against Chase
by the California state attorney general

Among the specific lapses, the lawsuit said that Chase and its employees:

  • Swore that filings seeking default judgment were not aimed at military service members, but in fact made no effort to check.
  • Filed sworn court documents in debt collection lawsuits without reviewing bank records that were supposedly the basis of the charge.
  • Failed to notify debtors of court action against them, while filing false papers attesting that the debtors had been notified.

The lawsuit said that during a period from January 2008 and April 2011, the bank filed more than 100 lawsuits a day. To maintain that volume,  employees robo-signed court documents “in mass quantities, typically hundreds at a time, without any knowledge of the facts alleged in the document and without regard to the truth or accuracy of those facts,” according to the complaint.

See related: Know your rights under the Fair Debt Collection Practices Act

What’s up next?

In Research and Statistics

Infographic: How Robo-signing works in credit card debt

When creditors mechanically and automatically certify that credit card debt is real without any documentary evidence, it’s called robo-signing, and the practice is both widespread and controversial

Published: May 10, 2013

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