JPMorgan Chase & Co. will pay $166 million and change credit-card collection practices after regulators found that the bank used abusive tactics to collect debts, the Consumer Financial Protection Bureau said on Wednesday.
The company agreed to resolve claims that its Chase Bank USA and Chase Bankcard Services Inc. units pursued the wrong borrowers, sought incorrect amounts or so-called zombie debt that was too old, or relied on documents with improper signatures, according to a CFPB statement.
Of the penalties, $136 million settles claims brought by the Consumer Bureau, 47 states and the District of Columbia. The Office of the Comptroller of the Currency imposed a $30 million penalty in a related action, CFPB said.
“Chase sold bad credit-card debt and robo-signed documents in violation of law,” CFPB Director Richard Cordray said in the agency’s statement. “We will continue to be vigilant in taking action against deceptive debt sales and collections practices.”
The settlement is JPMorgan’s second in two years over its debt-collection practices. In September 2013, the OCC ordered the bank to refund more than $300 million to customers. The company agreed to resolve the latest claims without admitting or denying wrongdoing.
Under the CFPB agreement, about $95 million will be paid to the participating states and the District of Columbia. An additional $11 million will go to states that handled the negotiations. Another $30 million will go to the consumer bureau. Bank customers will get about $50 million in refunds, CFPB said.
“We are pleased to resolve these legacy issues and are working to complete our remediation of affected credit card customers,” Paul Hartwick, a JPMorgan spokesman, said in an e-mailed statement.
The bank has taken “extensive steps” to resolve the issues, Hartwick said. Many of the same issues were addressed in the 2013 regulatory settlement, he said.
The JPMorgan units allegedly sold uncollectible accounts to third-party debt buyers and got judgments without following proper procedures, a practice known as robo-signing.
From 2009 to 2013, the bank recovered about $4.5 billion from defaulted accounts through collection lawsuits and from selling defaulted accounts to debt buyers.
As part of the deal with the states and CFPB, JPMorgan agreed to stop collections on about 528,000 consumers against whom it won judgments from January 2009 through June 2014.
“This is another massive failure by Chase to comply with the law,” Illinois Attorney General Lisa Madigan said in an e-mailed statement. “Chase’s shoddy practices disrupted the financial stability of nearly 50,000 people in Illinois struggling with their credit-card debt in the wake of the economic crisis.”
In 2012, CFPB penalized American Express Co. for falsely telling consumers that paying old debt would improve their credit scores. The company paid $112.5 million in fines and restitution. The agency has also taken action against Bank of America Corp. and Synchrony Bank over credit-card marketing.
About 77 million American consumers have debts ranging from $25 to $125,000 that are subject to collection, according to the CFPB. Most don’t know of the issues until they receive calls from debt collectors or review their credit reports, the agency said in a report this year.
Under the accord, JPMorgan must impose requirements to limit the reselling of its credit card debt, Cordray said in remarks Wednesday. Debt buyers must not be permitted to resell accounts to anyone other than the bank, according to Cordray.
The bank also may not sell “zombie debts,” or debts lacking documentation, in litigation, owed by a servicemember, or owed by someone deceased, he said.
“It should be clear that to subject people to collections efforts when they do not even owe Chase money is sloppy and illegal,” Cordray said.
(An earlier version of this story corrected the year that American Express was penalized.)