Following a comprehensive investigation, one of the leading credit card companies in the United States has been stopped in their tracks when it comes to persuing delinquent cardholders. The investigation carried out by the Office of the Comptroller of the Currency, known as the OCC, discovered that JP Morgan Chase had some alarming discrepancies in their debt collection practices which raised questions over the legal standing of some previous judgements won by the credit card lender in previous cases.
The issues being highlighted are reminiscent of the recent problems experienced by mortgage providers who were involved in the infamous Robo-Signing cases.
However, it does appear that rather than indicating any intention of malice on the part of JP Morgan Chase, the issues can be completely attributed to failure of the lender’s administration procedures. This will not do much to comfort consumers who have already fallen foul of the bank’s incorrect claims against them.
A number of causes for the discrepancies have been identified by trade journal Collections & Credit Risk, or CCR, including the fact that JP Morgan Chase were making use of three different computer networks throughout the collections process. However, these systems were not entirely compatible and communications between them was not accurate.
This resulted in a number of different outstanding balances for the same account meaning any claims made against the account holder may have been inaccurate. Another possible cause for the issues was that JP Morgan Chase outsourced a large amount of their collection procedures to third-parties who worked on an incentive basis.
Some of these outsourced attorneys are said to have been fairly well known for unsubstantial record keeping. It has been suggested that in as many as 20 percent of the cases, the sums claimed by these third party attorneys was not the same as what the bank believed was owed by consumers. In many cases, these differences were fairly large.
The bank has also recently restructured the collections department and many people have claimed that during this time, the new management team may have abolished some of the more expensive checks and procedures which might well have helped to avoid such inaccuracies had they still been in use today.
There is also the possibility that due to the effects of the credit crunch and recession, the large number of cases being processed by the debt collection agency put the department under additional pressure and staff members were encouraged to take short cuts in order to meet the demand for a faster turnaround of cases. In fact, one former staff member went on record to say that none of the claims handled by his former team were ever verified because supervisors had told staff that,
We are in a hurry. Go ahead and sign them.
Collection of debts is not an easy task, but it is necessary. Over the past two years, JP Morgan Chase charged off more than $20 billion. The debts were written off and passed to debt collection departments to begin legal action. If banks did not do this, then they would be unable to recover large sums of money and credit card interest rates would sky rocket in order to cover the costs of delinquent borrowers.
When this is considered, it is easy to understand how such mistakes were made in the wake of economic crisis. JP Morgan Chase are the lender being held up as an example of how not to recover debts, but several other lenders will no doubt have similar issues and will most likely be expecting their own visits from the Office of the Comptroller of the Currency.