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Chase probed for improper debt recovery practices

By , CardRatings contributor
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Chase probed for improper debt recovery practices

The Office of the Comptroller of Currency, a federal regulatory agency, is looking into allegations that JP Morgan Chase & Co. has been wrongly collecting judgments against "tens of thousands" of delinquent credit card borrowers. The details of the probe have not been released, but early information indicates a poor computer network, a problem American Banker's Jeff Horwitz describes as a failure "more machine than man."

The probe was instigated by a former employee's wrongful termination suit. The employee claims she was let go by Chase after she argued against the sale of credit card debts that she felt had faulty balances. The OCC began an inquiry into the claims which resulted in Chase ending all of its lawsuits against delinquent borrowers last year. The company did not respond to American Banker's requests for comments.

Employees and former employees are telling regulators the company's four computer systems that deal with billing don't work well together, resulting in each system delivering different totals. Doubt has also been cast on the outside attorneys hired by Chase, some of which are accused of poor record keeping and being motivated by a pay structure dependent on collection amounts. Files submitted to the Security and Exchange Commission by the ex-employee who is suing claim that almost 20 percent of cases sampled contained amounts used in lawsuits that were different than the amounts supplied by Chase.

The focus on bad credit card debt has been obvious at Chase since the economy turned sour. American Banker reveals that in the last decade the company "…recouped $130 million a year from bad consumer debt of all stripes. By 2009, recoveries on credit cards alone exceeded $1.2 billion."

The charges could affect tens of thousands of Chase credit card holders who were late on their accounts. There is no word how long the probe will take, or what, if any, charges could follow.

 

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