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JP Morgan Chase Stipulation and Consent Order May Have Broad Effects for Consumers

Wites & Kapetan, P.A., Attorneys at Law who practice business disputes, class actions, personal injury and financial injury, among other areas, discussed potential effects of recent rulings through a recent blog post.

The firm presents the following scenario: "So you once had a credit card, auto loan or student loan with a Bank, and you fell behind on payments. Maybe you were contacted by collection agencies and law firms to collect on the debt. A lawsuit was filed against you either by the Bank or by a third party company who bought your account from the Bank."

During the lawsuit, the bank submits an affidavit from an "Agent of the Bank" or "employee" stating that this individual has personal knowledge of the allegations in the affidavit and they have reviewed records of the bank and found the amount claimed in the complaint is accurate and owed to the bank.

A judgment may then be entered against the consumer based on this affidavit and sometimes a single account statement. However, the balance the consumer was sued for may have been inaccurate, whether it's due to charging an improper amount of interest or failing to account for the correct balance.

While this error may not be noticed or fixed by the bank, it may be sold as is to a third party, who then hired a law firm to file the lawsuit with very little supporting documentation and a general affidavit that does not actually verify the allegations.

According to Wites & Kapetan, this is a very real scenario for many consumers and their Chase Bank accounts.

In a previous post, the firm reported on the suspension of collection lawsuit filings by Chase Bank in 5 states. Prior to this suspension, the bank was in the news after a Whistleblower Lawsuit involving Linda Almonte, a former leader in the bank's credit card services division who accused the bank of firing her for objecting to the sale of millions in legal judgments obtained by the bank's lawyers, as half of the judgments had inadequate documentation that the accounts were even subject to the judgment, while 1/6 listed incorrect amounts.

Almonte reached a settlement with Chase after the bank failed to get the case dismissed.

Following this, the Office of the Comptroller of the Currency (OCC) investigated the bank and filed an enforcement lawsuit against JPMorgan Chase Bank, JP Morgan Bank and Trust Company and Chas Bank USA. This lawsuit sought a cease and desist order to stop unsound banking practices in collection with Chase's collection litigation practices.

As Wites and Kapetan reports, Chase executed an agreement on September 18, 2013 to allow for an entry of a Consent Order imposing extensive corrective measures to their procedures.

This news may impact consumers in two ways:

Chase will be forced to create and implement a plan for remediation of eligible accounts. This means anyone harmed by the bank's former practices, such as a judgment entered based on false information, must be identified and the harm must be rectified. There is no specific information about what sort of relief will be offered, however.

Consumers may also be impacted by the change in the collection industry. The use of something known as robo-signed affidavits has been widespread in the industry, and in 2010 it was discovered that many large banks routinely used affidavits signed by employees who did not actually review the documents personally. In many cases, employees were spending approximately 30 seconds on each affidavit, and thus had no real idea if the claims in the affidavit were true, hence the name robo-signing. JP Morgan Chase was among the financial giants caught in this act, along with GMAC, Wells Fargo and Bank of America.

If this practice comes under additional scrutiny by the OCC or other agencies, other financial institutions may be forced to use the Chase Consent Order and adjust their own procedures as well.

According to Wites & Kapetan, these changes may even prevent consumers from being forced to pay back money that is not owed. It will also impact all consumers who have been the subject of collection actions, as this order requires extensive cchanges not only in the practices of Chase Bank but of its debt purchasers, collection agencies and even law firms.

Consumers who feel they have been the victim of improper collection procedures or harassment are encouraged to consult with an attorney. Wites & Kapetan represents consumers in class action lawsuits as well as consumer debt issues and may be contacted online.

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