JPMorgan Agrees to Repay Customers in Credit-Card Settlement
Stock Chart for JPMorgan Chase & Co (JPM)
JPMorgan Chase & Co. (JPM) agreed to repay harmed consumers and fix problems with its handling of credit-card debt collections under an agreement with the U.S. Office of the Comptroller of the Currency released today.
The New York-based bank violated rules regarding collections practices, debt documents and sales of consumer credit-card debt, the OCC said in a consent order. JPMorgan, the biggest U.S. bank by assets, must provide remediation to affected customers, improve its documentation procedures with non-home loans and review lending accounts since 2005 for deficiencies that need to be repaired, the OCC said.
JPMorgan agreed to the sanctions without admitting or denying wrongdoing, according to today’s order. The settlement was announced at the same time as a separate $920 million agreement with multiple regulators over the bank’s London Whale trades.
“The unsafe or unsound practices identified by the OCC were most prevalent in the Bank’s consumer and community banking lines of business, including credit-card services, auto lending, and student lending,” according to the order. The bank’s employees -- or those of hired third-party firms -- signed affidavits that they personally reviewed debt documents that “were not based on such personal knowledge or review of the relevant books and records.”
The bank will review files and submit a plan to the regulator on how it intends to repay those harmed. Because the plan isn’t yet approved, the amount of remediation isn’t set.
“We have taken extensive steps over the past two years to remediate the issues that affected customers and redesign our practices,” said Bill Wallace, the bank’s head of operations for consumer and community banking, in a statement. “Although these issues affected less than 1 percent of Chase customers, any mistake is regrettable and does not reflect the high standards we set for ourselves.”
The problems were discovered by the bank in its own internal reviews in 2010, it said in a statement. JPMorgan said it stopped filing credit-card collection lawsuits against customers in early 2011 and hasn’t restarted.
Richard Cordray, director of the Consumer Financial Protection Bureau, has also made the debt collection industry a top priority this year. His agency, which has been focusing on the accuracy of information used to collect debts, is investigating JPMorgan’s practices, the bank said in a Securities and Exchange Commission filing last month. The consumer agency may write a regulation to create nationwide industry standards, Cordray said on July 10.
JPMorgan said in its SEC filing that it had responded to formal and informal inquiries from both federal and state regulators on credit-card collections. In May, the bank was sued by the California attorney general for violating state laws on the use of sworn documents in debt collection and taking illegal shortcuts to pursue borrowers.