July 27, 2015

CFPB Enforcement Action on Credit Card Debt Sales and Collections

2 min

On July 7, 2015, the CFPB and attorneys general from 47 states and the District of Columbia (in coordination with the Office of the Comptroller of the Currency) entered into a consent order against JPMorgan Chase regarding its credit card debt sales practices.

The consent order states that Chase used various methods to collect debts stemming from Chase's credit card business, including initiating collections lawsuits or selling the debt to third-party debt buyers. Under the Bureau's unfairness authority, the CFPB and states found that, from 2009 to 2012, Chase sold certain accounts that had already been settled by agreement, paid in full, discharged in bankruptcy, identified as fraudulent and not owed by the debtor, or subject to an agreed-upon payment plan; that were no longer owned by Chase; or that were otherwise no longer enforceable. The consent order states that Chase "knew or should have known" that certain credit card accounts were unenforceable or contained inaccurate information.

These sales, in turn, led to improper collection activity, which the CFPB and the states found constitutes assistance in deceptively collecting debt. Chase was also found to have used robo-signed documents in its debt-collection lawsuits and sworn statements to debt buyers, resulting in unfair and deceptive sworn documents practices.

Under the consent order, Chase will pay a $30 million penalty to the CFPB, as well as at least $50 million in refunds to consumers with whom Chase was engaged in collections litigation between January 1, 2009 and June 30, 2014. Chase is also ordered to make $106 million in payments to the states.

In addition to monetary relief, the consent order:

  • Enjoins Chase from collecting, enforcing, selling, or transferring debts for consumers whose Chase credit card accounts were sent to collections litigation during the relevant period;
  • Requires Chase to contract with debt buyers to prevent the resale of debts purchased by Chase, except back to Chase;
  • Requires Chase to notify consumers that their debt has been sold and make their account information available to them;
  • Prevents Chase from selling specified debts, including those that do not have the required documentation, have been charged off for over three years or where the consumer has not paid for three years, are in litigation, are owed by a servicemember, or are owed by someone who is deceased, or where the debtor has a payment plan;
  • Requires Chase to withdraw, dismiss, or terminate collections litigation;
  • Requires Chase to stop robo-signing affidavits; and
  • Orders Chase to verify all debts when filing a collections lawsuit.