JP Morgan pays $136M to settle claims of bad debt

JP Morgan pays $136M to settle claims of bad debt

J.P. Morgan Chase will pay $136 million to settle a joint state-federal investigation over its shoddy credit card debt-collection practices.

The Consumer Financial Protection Bureau (CFPB) and attorneys general in 47 states and the District of Columbia announced Wednesday that they determined that Chase had sold bad credit card debt and illegally robo-signed court documents.

Chase will pay at least $50 million in consumer refunds and a $30 million penalty to the Office of the Comptroller of the Currency (OCC).

ADVERTISEMENT

"Chase sold bad credit card debt and robo-signed documents in violation of law,” said CFPB Director Richard Cordray.

The investigation found that the nation’s largest bank in terms of assets sold so-called zombie debts to third-party debt buyers, which included accounts that were inaccurate, settled, discharged in bankruptcy, not owed, or not collectible.

Chase must also permanently stop all attempts at collections on more than 528,000 consumers’ accounts.

The order requires Chase to document and confirm debts before selling them to debt buyers or filing collections lawsuits.

The bank must overhaul its credit card debt collection practices in areas such as collections litigation and debt sales and debt buying.

Among the reforms, the agreement requires new safeguards to ensure debt information is accurate, fixes wrong information and provides additional information to consumers who owe debts.

Chase, which sued the affected consumers for credit card debts and obtained judgments between Jan. 1, 2009 and June 30, 2014, must notify the borrowers of the change and request that all three major credit reporting agencies not report the judgments.