Agreement halts collections on 7,000 Washingtonians, requires debt collection reforms, secures $4M for Washington
SEATTLE — Chase Bank and Chase Bankcard Services will halt its unlawful credit card debt collection practices as a result of a joint state-federal investigation that found Chase stacked the deck against consumers by pursuing collections cases based on false information. Some instances include listing debt that was the wrong amount, tied to the wrong person, discharged, or time-barred — what’s often called “zombie debt.” Washington will receive $4 million as part of the agreement.
The Washington State Attorney General’s Office was one of the lead states that conducted an investigation of Chase’s debt collection practices from 2009-2014. This ultimately led to the enforcement action being announced today.
“Chase’s unfair and deceptive debt collection practices directly harmed 7,000 Washington consumers,” said Washington State Attorney General Bob Ferguson. “With today’s enforcement action, I am holding Chase accountable for breaking the rules, while ending unfair collection efforts against Washington consumers.”
Investigation uncovered unlawful debt collection practices
Washington was part of a multi-state investigation, led by Attorneys General in 47 states and the District of Columbia, as well as the federal Consumer Financial Protection Bureau (CFPB). According to the joint state-federal probe, Chase violated the Washington Consumer Protection Act and the federal Fair Debt Collection Practices Act by:
- Subjecting consumers to incorrect account collections activity.
- Selling certain accounts to debt buyers that were inaccurate, settled, discharged in bankruptcy, not owed by the consumer, or otherwise uncollectable.
- Causing inaccurate credit reporting and unlawful judgments that may affect consumers’ ability to obtain credit, employment, housing and insurance in the future.
- Filing lawsuits and obtaining judgments against consumers using false and deceptive affidavits and other documents that were prepared without proper procedures, a practice commonly referred to as “robo-signing.” These practices misled consumers and courts and caused consumers to pay for false or incorrect debt and incur legal expenses and court fees to defend against invalid or excessive claims.
- Making calculation errors when filing debt collection lawsuits that sometimes resulted in judgments against consumers for incorrect amounts.
Chase to cease collecting on 528,000 accounts; 7,000 in Washington state
Chase has agreed to cease all collection efforts on an estimated 528,000 accounts, including 7,000 Washingtonians. Chase sued the affected consumers for credit card debts and obtained judgments between January 1, 2009 and June 30, 2014. Chase will notify affected consumers of the change and will request that all three major credit reporting agencies not report the judgments.
Agreement requires debt collection reforms
The agreement requires Chase to significantly reform its credit card debt collection practices. The agreement requires new safeguards to help ensure debt information is accurate and inaccurate data is corrected, provides additional information to consumers who owe debts, and bars Chase’s debt buyers from reselling consumer debts to other purchasers. The agreement also tightens evidence requirements in collections litigation.
Debt resale prohibition
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. The agreement prohibits entities that buy debt from Chase from reselling that debt. Previously, initial buyers of Chase’s consumer credit card debt could resell the debt, subsequent buyers could flip the debt to other buyers, and the process could repeat itself several times over. If initial information about the debt was incorrect or was transmitted with errors to a subsequent debt buyer, consumers could be stuck with the difficult or even impossible burden of successfully challenging or correcting errors.
Payment to states and CFPB
Chase will pay $106 million to the 47 participating states and the District of Columbia and $30 million to the federal Consumer Financial Protection Bureau. Washington’s share is approximately $4 million.
Consumer restitution to 340 Washingtonians totaling $552,000
This agreement also ensures that Chase will fulfill its pre-existing obligation to provide $50 million in consumer restitution in accordance with a separate 2013 consent order reached with the Office of the Comptroller of the Currency. Of that total, $552,000 has been disbursed to 340 Washingtonians. If Chase’s 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. The attorneys general and CFPB would then use these funds for consumer protection.
Recently retired Senior Counsel Dave Huey and Assistant Attorney General Benjamin Roesch were leads on this case.
Consumers with debt collection questions or complaints
Debt collectors are bound by state and federal laws, including the Fair Debt Collection Practices Act (FDCPA), which prohibits debt collectors from using abusive, unfair, or deceptive practices to collect from consumers. Consumers may also have the option of pursuing claims in state or federal court.
Consumer information about debt collection issues:
The Office of the Attorney General is the chief legal office for the state of Washington with attorneys and staff in 27 divisions across the state providing legal services to roughly 200 state agencies, boards and commissions. Attorney General Bob Ferguson is working hard to protect consumers and seniors against fraud, keep our communities safe, protect our environment and stand up for our veterans. Visit www.atg.wa.gov to learn more.
Peter Lavallee, Communications Director, (360) 586-0725; PeterL@atg.wa.gov