A piece in the Wall Street Journal dug up yet another damning fact about Jamie Dimon's J.P. Morgan Chase. This time, reporters got hold of an internal bank survey of its credit-card collections suits. It turns out that Chase's own survey found that huge numbers of lawsuits filed by the bank contained errors.
From the article:
The bank studied roughly 1,000 lawsuits and found mistakes in 9% of the cases, said people familiar with the review.
"Any rate above zero is high," said one person familiar with the bank's conversations with regulators.
Thirteen states, as well as the Office of the Comptroller of the Currency, a primary banking regulator, are investigating Chase's insanely sloppy practices in the area of credit-card collections. I've been following this for years thanks to an acquaintance with former Chase VP and whistleblower Linda Almonte, who saw horrific abuses firsthand (I have a chapter on Linda's crazy experiences coming out in my next book). The piece mentions her case:
The case credited with jump-starting investigations into J.P. Morgan's pursuit of credit-card debt was a federal-court lawsuit filed in 2010 by a former J.P. Morgan assistant vice president, Linda Almonte, who alleged that employees known as "attorney liaisons" signed "multiple stacks of affidavits" without looking at the underlying documentation. She alleged that 11,472 out of 23,000 cases in one portfolio, or 50%, were "missing adequate documentation."
I'm glad that the states are finally listening to Linda and that this news is starting to come out. The story is actually far worse than is being described in the papers. It involves allegations of a rather complicated scam tied to secondary sales of credit-card debt – it's easier to sell credit card debt when a judgment has already been obtained, so it seems companies like Chase will go to great lengths, including mass robosigning and other abuses, to obtain judgments.
Chase is the headline target of these new investigations, but most analysts believe the same exact things go on at other banks and credit companies. Once the bigger state lawsuits gain momentum, we're likely to find out, as we did in the foreclosure scandals, that faulty paperwork and perjured/robosigned affidavits pervade the entire consumer debt industry. Somehow I don't think it will result in a $26 billion settlement this time, however.