State to Receive Nearly $1M from Chase in Settlement

Nearly $1 million will be received by the State of Hawai’i in a joint federal-state settlement involving unlawful credit card debt collection practices by Chase Bank USA North America and Chase Bankcard Services, Inc.

Attorney Generals in 47 states, plus the District of Columbia and the Consumer Financial Protection Bureau, are involved in the settlement, which would prevent re-sales by debt buyers, target ‘zombie debts,” and halt collection on half a million individual consumer accounts in the future.

“While Chase is entitled to collect lawfully on unpaid debts, its practices here were illegal and outrageous,” said Attorney General Douglas Chin. “Our laws forbid anyone from using false or incorrect amounts or robo-signing documents. This settlement holds Chase accountable for its past practices, provides restitution to harmed consumers, and we expect that it will ensure that this won’t happen again.”

In the settlement, $136 million will be paid by Chase to the 47 participating states, and $30 million will go to CFPB. Of the amount, Hawai’i will receive $920,000. The money from the settlement will be use to provide funding and assistance to consumer education, consumer outreach, consumer protection enforcement, or consumer protection litigation.

“If a company says you owe them money, it better be right,” said State Office of Consumer Protection Executive Director Stephen Levins. “In this case, our investigation revealed that Chase lacked sufficient safeguards to prevent it and others from pursuing collection actions that it had no business initiating, such as going after the wrong person, demanding excessive payments, and pursuing discharged, time barred or very old debts.”

In the settlement, Chase will cease all of its collection efforts on 500,000 accounts throughout the country, 530 of which are in Hawai’i. Those in the state that were affected were being sued by Chase for credit card debts. They obtained judgments between Jan. 1, 2009 and June 30, 2014. Notification of the affected borrowers will take place by Chase, who will also request that the credit reporting agencies don’t report the judgments.

Chase will also fulfill $50 million in consumer restitution through a separate 2013 consent order that was reached with the Office of the Comptroller of the Currency. Thirty Hawai’i consumers have already been issued restitution payment checks of $26,000 each. If by July 1 of next year, Chase doesn’t pay out the $50 million, the company will pay the remaining balance to state attorney generals and the CFPB.

Under the settlement, Chase is required to reform its credit card debt collection practices in the areas of declarations, collections litigation, debt sales, and debt buying.

The joint state-federal probe claims Chase did the following:

• Subjected consumers to collections activity for accounts that were not theirs in amounts that were incorrect or noncollectable.
• Subjected consumers to inaccurate credit reporting and unlawful judgments that may affect consumers’ ability to obtain credit, employment, housing, and insurance in the future.
• Sold certain accounts to debt buyers that were inaccurate, settled, discharged in bankruptcy, not owed by the consumer, or otherwise noncollectable.
• Filed lawsuits and obtained judgments against consumers using false and deceptive affidavits and other documents that were prepared without following required procedures, a practice commonly referred to as “robo-signing.” These practices misled consumers and courts and caused consumers to pay false or incorrect debt and incur legal expenses and court fees to defend against invalid or excessive claims.
• Made calculation errors when filing debt collection lawsuits that sometimes resulted in judgments against consumers for incorrect amounts.

In 2011, Chase suspended its consumer credit card debt sales and collections litigation. Nearly 64.5 million open accounts with $124 billion in outstanding credit card debt were maintained by Chase in 2012. Recovery of $4.5 billion worth of debt from defaulted accounts was collected through collection lawsuits and selling defaulted accounts to third-party debt buyers.