California’s top law-enforcement official accused JPMorgan Chase on Thursday of flooding the state’s courts with questionable lawsuits to collect a glut of overdue credit-card debt.
On Thursday, the California attorney general, Kamala D. Harris, sued the nation’s largest bank in California Superior Court over claims that the lender “committed debt collection abuses against tens of thousands of California consumers,†according to court records.
JPMorgan Chase, Ms. Harris says, deluged the courts with dubious lawsuits to collect soured credit-card debt. For roughly three years, between January 2008 and April 2011, Chase filed thousands of lawsuits each month, the lawsuit says. On a single day, for example, JPMorgan filed 469 lawsuits, court records show.
As the bank plowed through the lawsuits, Ms. Harris says, JPMorgan took shortcuts like relying on court documents that were not reviewed for accuracy. “To maintain this breakneck pace†JPMorgan used “unlawful practices,†according to the lawsuit filed on Thursday.
The accusations outlined in the lawsuit echo problems â€" from questionable documents used in lawsuits to incomplete records â€" that plagued the foreclosure process and prompted a multibillion-dollar settlement with big banks. One hallmark of the foreclosure crisis, robosigning, in which banks worked through mountains of legal documents without reviewing them for accuracy, is at the center of Ms. Harris’s lawsuit against JPMorgan.
The move on Thursday comes as JPMorgan navigates a thicket of regulatory woes. The Office of the Comptroller of the Currency, one of the bank’s chief regulators, is preparing an enforcement action against the bank over the way it collects its credit card debt, according to several people who were not authorized to discuss the cases publicly.
JPMorgan assembled a “debt collection mill that abuses the California judicial process,†according to the lawsuit. Many of the lawsuits filed rely on questionable or incomplete records, Ms. Harris said. “At nearly every stage of the collection process,†JPMorgan “cut corners in the name of speed, cost savings, and their own convenience,†Ms. Harris said.
While JPMorgan’s debt-collection practices are under scrutiny, flaws are increasingly common in credit card lawsuits filed by rival banks, according to interviews with dozens of state judges, regulators and lawyers who defend consumers.
“A vast number of the lawsuits are flawed and most of them can’t prove the individual actually owes the debt,†said Noach Dear, a civil court judge in Brooklyn who said he has presided over as many as 150 such cases a day.
JPMorgan could not be immediately reached for comment.
