http://www.americanbanker.com/issues/177_49/chase-credit-cards-collections-occ-probe-linda-almonte-1047437-1.html?zkPrintable=1&nopagination=1
JPMorgan Chase & Co. took procedural shortcuts and used faulty account records in suing tens of thousands of delinquent credit card borrowers for at least two years, current and former employees say.
The process flaws sparked a regulatory probe by the Office of the Comptroller of the Currency and forced the bank to stop suing delinquent borrowers altogether last year.
The bank's errors could call into question the legitimacy of billions of dollars in outstanding claims against debtors and of legal judgments Chase has already won, current and former Chase employees say.
For the banking industry at large, the situation at Chase highlights the risk that shoddy back-office procedures and flawed legal work extends well beyond mortgage servicing.
"We did not verify a single one" of the affidavits attesting to the amounts Chase was seeking to collect, says Howard Hardin, who oversaw a team handling tens of thousands of Chase debt files in San Antonio. "We were told [by superiors] 'We're in a hurry. Go ahead and sign them.'"
Hardin left the bank in 2010 to work in a different industry.
Chase declined repeated requests to discuss details of its consumer debt collection activities.
Company documents, court filings, and interviews with seven current and former employees reveal that Chase's credit card litigation operation was allegedly plagued by unreliable external attorneys, management's disregard for accuracy, and patchy technology.
The bank's computer systems frequently disagreed about how much debtors actually owed, several of the Chase sources say.
The employees' stories corroborate allegations made by Linda Almonte, a former mid-level business process executive in Chase's San Antonio-based Credit Card Litigation Support Group. Dismissed in November 2009 after six months on the job, Almonte filed whistleblower complaints and a wrongful termination suit claiming that she was fired for objecting to the sale of credit card debts with erroneous balances.
Almonte's complaints drew the attention of the OCC, former Chase employees say, and led to the April 2011 shutdown of a formidable collections operation that generated several billion dollars of legal judgments every year.
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Response by Riversider
about 14 years ago
Posts: 13573
Member since: Apr 2009
The story says the problems came to a head when faulty computer systems clashed with the aggressive approach of Chase management. Chase had several computer programs to track consumer payments and debts. They worked well independently, but didn’t properly talk to each other, often creating discrepancies in how much customers owed. At first, employees could reconcile the differences by hand, but when new management sought to speed up recoveries, employees were told to use shortcuts, the story says.
Outside law firms often represented Chase in court. It’s a high-volume business for the firms, which are paid in proportion to debts they recoup. The law firms didn’t have access to some of Chase’s computer systems to check the documentation and often rushed to file “slapdash work,” the story says. According to an internal document, the numbers used by law firms representing Chase disagreed with the bank’s internal records in almost 20 percent of the cases in one sampling. A whistle-blower lawsuit stated that customers usually owed less than what the bank represented.
When consumers wrote to Chase, their letters were often ignored or shredded. “Borrower correspondence sent to the San Antonio facility, such as bankruptcy notifications, address changes, and hardship requests, were being dropped on an unmanned desk, according to a 2009 printout from Chase’s troubleshooting log,” Horwitz writes. The story is filled with details and documents.
The procedures not only dragged consumers into court with faulty records but also created financial consequences for Chase. In April 2011, the bank stopped filing consumer debt-collection lawsuits and closed down an in-house collections office that had recouped “several billion dollars of legal judgments every year,” the story says. Without filing new cases, Chase limits its options to recoup legitimate debts it may be owed. It is not clear what the bank is doing to collect on those debts.
Last week, the House of Representatives, with the support of every Republican and most Democrats — as well as a White House endorsement — passed something it called the “Jump-start Our Business Start-ups Act,” or JOBS for short. The logic is that if we can just make it easier for companies to raise capital, they will hire more people.
Do you remember the scandals of the dot-com era? Then Wall Street firms got business by promising companies that they would write positive research reports if the company would only hire them to underwrite an initial public offering of stock. Companies went public at a feverish pitch, often rising to amazing heights without much in the way of sales, let alone profits. Then it all came crashing down.
In the aftermath, the brokers were forced by the Securities and Exchange Commission, as well as the New York attorney general, to mend their ways. No longer would analysts be allowed to go on such I.P.O. sales calls.
This bill would end that rule for all but the biggest new offerings — those that involved companies with sales of over $1 billion. And it would go much further. As the law stands now, to keep underwriters from making sales pitches that go beyond what companies are allowed to say, the underwriters are prohibited from publishing research on a company while its initial public offering is under way. This bill would allow such research, and would say that the company bore no responsibility for what was said in it. Effectively, there would be a second prospectus — one largely immune to securities laws and free to hype the offering by making forecasts not otherwise allowed.
This is "game change" -- banks / holding cos are creating large enterprise risk groups to present this type of thing. "Headline" or "Whiplash" Risk Management. I am in a big one. It will dilute profits -- I'd sell now if hold financials. Still, from the consumer POV a good thing. But nothing good is free. There will be fees.
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Response by huntersburg
about 14 years ago
Posts: 11329
Member since: Nov 2010
Bernie, how's the Ponzi scheme going?
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Response by Bernie123
about 14 years ago
Posts: 281
Member since: Apr 2009
Huntersburg - what are you refering to more specifically? Of course mortgage became a ponzi (though it took a lot more than just the banks to make it happen...) The threads title is about the new CSPB. My opinion is that is indeed necessary and a good thing but that it creates huge costs for the banks and so I think it's a good time to sell financials. YOY growth won't be there.
The story says the problems came to a head when faulty computer systems clashed with the aggressive approach of Chase management. Chase had several computer programs to track consumer payments and debts. They worked well independently, but didn’t properly talk to each other, often creating discrepancies in how much customers owed. At first, employees could reconcile the differences by hand, but when new management sought to speed up recoveries, employees were told to use shortcuts, the story says.
Outside law firms often represented Chase in court. It’s a high-volume business for the firms, which are paid in proportion to debts they recoup. The law firms didn’t have access to some of Chase’s computer systems to check the documentation and often rushed to file “slapdash work,” the story says. According to an internal document, the numbers used by law firms representing Chase disagreed with the bank’s internal records in almost 20 percent of the cases in one sampling. A whistle-blower lawsuit stated that customers usually owed less than what the bank represented.
When consumers wrote to Chase, their letters were often ignored or shredded. “Borrower correspondence sent to the San Antonio facility, such as bankruptcy notifications, address changes, and hardship requests, were being dropped on an unmanned desk, according to a 2009 printout from Chase’s troubleshooting log,” Horwitz writes. The story is filled with details and documents.
The procedures not only dragged consumers into court with faulty records but also created financial consequences for Chase. In April 2011, the bank stopped filing consumer debt-collection lawsuits and closed down an in-house collections office that had recouped “several billion dollars of legal judgments every year,” the story says. Without filing new cases, Chase limits its options to recoup legitimate debts it may be owed. It is not clear what the bank is doing to collect on those debts.
http://www.businessweek.com/articles/2012-03-13/credit-card-debts-got-robo-signers-too
Last week, the House of Representatives, with the support of every Republican and most Democrats — as well as a White House endorsement — passed something it called the “Jump-start Our Business Start-ups Act,” or JOBS for short. The logic is that if we can just make it easier for companies to raise capital, they will hire more people.
Do you remember the scandals of the dot-com era? Then Wall Street firms got business by promising companies that they would write positive research reports if the company would only hire them to underwrite an initial public offering of stock. Companies went public at a feverish pitch, often rising to amazing heights without much in the way of sales, let alone profits. Then it all came crashing down.
In the aftermath, the brokers were forced by the Securities and Exchange Commission, as well as the New York attorney general, to mend their ways. No longer would analysts be allowed to go on such I.P.O. sales calls.
This bill would end that rule for all but the biggest new offerings — those that involved companies with sales of over $1 billion. And it would go much further. As the law stands now, to keep underwriters from making sales pitches that go beyond what companies are allowed to say, the underwriters are prohibited from publishing research on a company while its initial public offering is under way. This bill would allow such research, and would say that the company bore no responsibility for what was said in it. Effectively, there would be a second prospectus — one largely immune to securities laws and free to hype the offering by making forecasts not otherwise allowed.
http://www.nytimes.com/2012/03/16/business/the-return-of-the-rip-off-factor-on-wall-street.html?pagewanted=1&_r=1#
This is "game change" -- banks / holding cos are creating large enterprise risk groups to present this type of thing. "Headline" or "Whiplash" Risk Management. I am in a big one. It will dilute profits -- I'd sell now if hold financials. Still, from the consumer POV a good thing. But nothing good is free. There will be fees.
Bernie, how's the Ponzi scheme going?
Huntersburg - what are you refering to more specifically? Of course mortgage became a ponzi (though it took a lot more than just the banks to make it happen...) The threads title is about the new CSPB. My opinion is that is indeed necessary and a good thing but that it creates huge costs for the banks and so I think it's a good time to sell financials. YOY growth won't be there.