Arkansas Settles with Chase to Change Unlawful Credit Debt Collection Practices
July 8, 2015
LITTLE ROCK – Arkansas Attorney General Leslie Rutledge today announced a $136 million joint state-federal settlement with Chase Bank USA N.A. and Chase Bankcare Services Inc. in which both will reform unlawful credit card debt collection practices. Arkansas will receive $342,758.11 of the settlement.
The joint agreement, through an assurance of voluntary compliance with the States and a separate order with the Consumer Financial Protection Bureau (CFPB), follows an investigation into Chase’s past debt collection practices.
“While Chase is entitled to collect lawfully on unpaid debts, it is not at liberty to use false information to pursue collection cases against Arkansas consumers,” said Attorney General Rutledge. “This agreement today holds Chase accountable for these unfair actions, provides restitution to harmed consumers in Arkansas and puts in place proper protections to ensure these practices never take place again. Debt collectors, including Chase, are prohibited from using abusive, unfair or deceptive practices to collect from consumers.”
The agreement today requires Chase to significantly reform its credit card debt collection practices in areas of declarations, collections litigation, debt sales and debt buying. Debt buying involves the sale of debt by creditors or other debt owners, often for pennies on the dollar, to buyers who then attempt to collect the debt at full value or sell it to other buyers.
Among other reforms, the agreement requires new safeguards to help ensure debt information is accurate, including the correction of inaccurate data provisions of additional information to consumers who owe debts and a prohibition to Chase’s debt buyers from reselling consumer debts to other purchasers.
Previously, initial buyers of Chase’s consumer credit card debt could resell the debt, the subsequent buyer could flip the debt to another buyer, and the process could repeat itself many times. If initial information about the debt was incorrect or was transmitted with errors to a subsequent debt buyer, that could result in long-term harm to the consumer and leave the consumer with the difficult or even impossible burden of successfully challenging or correcting errors.
The investigation uncovered unlawful debt collection practices. According to the joint state-federal probe, Chase:
* Subjected consumers to collections activity for accounts that were not theirs, in amounts that were incorrect or uncollectable.
* Subjected consumers to inaccurate credit reporting and unlawful judgments that may affect consumers’ ability to obtain credit, employment, housing and insurance in the future.
* Sold certain accounts that were inaccurate, settled, discharged in bankruptcy, not owed by the consumer or otherwise uncollectable to debt buyers.
* Filed lawsuits and obtained judgments against consumers using false and deceptive affidavits and other documents that were prepared without following required procedures, a practice commonly referred to as “robo-signing.” These practices misled consumers and courts and caused consumers to pay false or incorrect debt and incur legal expenses and court fees to defend against invalid or excessive claims.
* Made calculation errors when filing debt collection lawsuits that sometimes resulted in judgments against consumers for incorrect amounts.
Chase suspended its consumer credit card debt sales in 2013 and collections litigation in 2011. In 2012, Chase maintained approximately 64.5 million open accounts with $124 billion in outstanding credit card debt. From 2009-2013, Chase recovered approximately $4.5 billion of debt from defaulted accounts through collection lawsuits, selling defaulted accounts to third-party debt buyers, or both.
Chase has agreed to cease all collection efforts on more than 528,000 consumers, including an estimated 1,200 in Arkansas. Chase sued the affected consumers for credit card debts and obtained judgments between January 1, 2009 and June 30, 2014. Chase will notify affected borrowers of the change and will request all three major credit reporting agencies to not report the judgments.
The agreement also ensures that Chase will fulfill $50 million in consumer restitution through a separate 2013 consent order reached with the Office of the Comptroller of the Currency<http://www.occ.gov/news-issuances/news-releases/2013/nr-occ-2013-139.html> (OCC). Chase estimates that so far it has provided $25,300 in restitution to 40 Arkansas consumers.
If Chases’ consumer restitution through the OCC action falls short of $50 million by July 1, 2016, Chase must pay the remaining balance to State attorneys general and the CFPB.
In addition to Arkansas, the following attorneys general are participating in the Chase settlement: Alaska, Alabama, Arizona, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia and Wisconsin.