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(UPDATE) Mississippi seeks its own reckoning with JPMorgan over illegal debt collections

jp-morgan-chase-logo-600x350By TED CARTER

Mississippi joined California in staying out of a legal settlement announced Wednesday by which JPMorgan Chase will pay 47 states and the federal government $125 million for illegal consumer credit collection practices.

The settlement announced by the U.S. Consumer Financial Protection Bureau and the attorneys general of several states also includes $50 million in restitution to credit card holders. A breakdown of the $125 million portion of the multi-state settlement gives participating states $95 million to split. The remainder goes to the Consumer Financial Protection Bureau, or CFPB as the watchdog agency is widely known.

Federal regulators estimate Chase filed more than 528,000 lawsuits against consumers and provided over 150,000 sworn statements for debt buyers to use in their own collections lawsuits, often using robo-signed documents.

CFPB Director Richard Cordray said in a press call the settlement prevents Chase from collecting or transferring the debts of roughly 500,000 consumers whose Chase credit card accounts were sent into collection litigation between Jan. 1, 2009 and June 30, 2014. Chase will also withdraw or terminate any pending lawsuits, Cordray said, and must contact credit reporting companies to seek to remove faulty judgments from consumers’ credit reports.

Mississippi and California apparently like their chances of gaining a much larger settlement or judgment through separate suits filed against JPMorgan Chase that claim a range of illegal consumer debt practices by the financial services giant.

The Mississippi Attorney General’s Office said its suit alleges wide-spread misconduct by JP Morgan and the third party collection companies that bought consumer debt from JP Morgan. Many of the collection efforts mimicked the “robo-signed” documents and other illegalities JPMorgan and other large national lenders engaged in during the nationwide housing foreclosure crisis of the previous decade, the state’s suit says.

Those irregularities with mortgage servicing led to a multi-billion dollar settlement with all of the states.

“Ironically, the fact that the stakes are smaller seemed to encourage even worse conduct in the collection of consumer credit-card debt,” Mississippi’s December 2013 suit says. “Because the debts were smaller than with mortgages, it made even less economic sense for banks to invest in the process to ensure accuracy and reliability.”

The AG’s office said Mississippi’s lawsuit involves a wide range of conduct,” including ensuring that out-of-state lawyers who file debt collection lawsuits against Mississippians follow our state’s laws and that Chase comply with Mississippi law in its debt collection and debt sale practices.”

Mississippi’s lawsuit alleges the misconduct and attempts to side step Mississippi debt collection laws also “infected its auto lending and student lending services and collection practices.”

In many instances, the so called “debt-mills” that worked with JPMorgan sought to collect debts that had already been paid off, the suit says.

The wrongful actions and cutting of corners in collection increased as credit card delinquencies exploded, according to Mississippi’s suit. “Chase knowingly made false and misleading demands for debt, filed complaints in collections litigation that were unverified and lacked evidence, and sold debt for collection that was unreliable and undocumented.”

The 33-page suit AG Jim Hood filed claims JPMorgan and third-party debt collector Couch Conville filed between 400 and 500 flawed lawsuits against Mississippi credit card holders, all as part of a strategy to obtain default judgments. “

“While Chase reaped record-high recoveries from its unfair and deceptive collection practices, the state and its residents suffered real and sustained harm,” Hood’s suit says.

Mississippi’s suit seeks an award of $10,000 for each of JPMorgan’s violations.

Hood’s suit says that in the 18 months leading to filing the suit in late 2013, the AG’s office reviewed hundreds of thousands of pages of documents from numerous sources and analyzed agreements through which JPMorgan sold defaulted accounts to other debt collectors. AG investigators also pored through files of consumers whose debts were arbitrated or litigated and consumer disputes by Mississippi consumers.

“A clear and consistent picture has emerged of a collections process riddled with errors, misconduct, and misrepresentations at every stage,” the suit says. The suits puts the start of the flawed collections “from at least” January 2007.

JPMorgan Chase, according to the suit, issued $128 billion worth of credit to 64 million card holders in 2012.

A large portion of the troubled collections stemmed from acquired debt from the likes of distressed bank Washington Mutual, its credit-card issuer Providian Financial and defunct retailers such as Circuit City, the suit says.

“Acquired debt had multiple layers of problems,” the AG says, often lacking backup documentation and data, making it impossible to verify account information in litigation.

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