Phoenix - Chase Bank USA N.A. and Chase Bankcard Services Inc. will reform its unlawful credit card debt collection practices through a $136 million joint state-federal settlement reached with Attorney General Mark Brnovich, attorneys general in 47 states plus the District of Columbia, and the Consumer Financial Protection Bureau. Arizona will receive $3.1 million as a result of the national settlement.
The joint state-federal agreement, through an Assurance of Discontinuance with the states and a separate order with the CFPB, follows an investigation into Chase’s past debt collection practices.
“Chase’s consumer credit card debt collection practices harmed consumers here in Arizona and across the country,” Attorney General Brnovich said. “In many cases, Chase stacked the deck against consumers by pursuing or unleashing collections cases based on information that was just plain wrong or even false. These include instances where the listed debt was the wrong amount, was tied to the wrong person, was discharged, time barred or very old—what’s often called ‘zombie debt.’ It’s an affront to consumers, courts, our laws and fairness.”
Arizona's court-ordered settlement states that the funds will be used "exclusively for consumer debt education, credit counseling, or debt management programs administered by the Attorney General; financial literacy or planning programs administered by the Attorney General; and/or for consumer protection law enforcement efforts by the Attorney General in areas related to consumer credit or debt collection, at the discretion of the Attorney General." (pg. 30 of order)
Agreement Requires Debt Collection Reforms
The Assurance, which is subject to court approval, 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 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 resale prohibition is significant. 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 over. 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.
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 to debt buyers that were inaccurate, settled, discharged in bankruptcy, not owed by the consumer, or otherwise uncollectable.
- 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 Credit Card Debt Sales & Collections Litigation
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.
“While Chase is certainly entitled to collect lawfully on unpaid debts, our laws forbid anyone from using false or incorrect amounts or robo-signing documents,” Attorney General Brnovich said. “Though the unlawful debt collection practices we allege have stopped, this enforcement action holds Chase accountable for its past practices, provides restitution to harmed consumers, and we fully expect that it will ensure that this won’t happen again.”
Chase to Cease Collecting on 528,000 Consumers
Chase has agreed to cease all collection efforts on more than 528,000 consumers, including an estimated 13,422 in Arizona. 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. Chase estimates that so far it has provided $431,000 in restitution to 330 Arizona 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.
Payment to States and CFPB
Chase will pay more than $95 million to the 47 participating states and the District of Columbia, an additional $11 million to the executive committee states that conducted the investigation and settlement negotiations, and $30 million to the CFPB. Arizona’s share is $3,100,081.07.
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. Consumers can also file a complaint with our office: Arizona Attorney General Complaint Form.
Consumer information about debt collection issues:
This case is being handled by Assistant Attorney General Taren Ellis Langford.
If you believe you have been a victim of consumer fraud, please contact the Attorney General's Office in Phoenix at (602) 542-5763, in Tucson at (520) 628-6504, or outside the Phoenix and Tucson metro areas at 1 (800) 352-8431. Consumers can also file complaints online by visiting the Attorney General’s Web site.