Have Banks Been Robo-Signing Credit Card Documents Too?

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"Have Banks Been Robo-Signing Credit Card Documents Too?"

Several months ago, the nation’s biggest banks became embroiled in the “robo-signing” scandal, when it became clear that they had been approving thousands of foreclosures without verifying the proper documents or guaranteeing borrowers due process. The banks submitted fraudulent documents to courts and were forced to halt their foreclosures processes entirely as they sorted out what happened. “I had no idea what I was signing,” said one Bank of America employee. “We had no knowledge of whether the foreclosure could proceed or couldn’t, but regardless, we signed the documents to get these foreclosures out of the way.”

Robo-signing people into foreclosure is bad enough. But as it turns out, the practice may not have been limited to residential mortgages. American Banker, in fact, notes that JP Morgan Chase may also have been robo-signing credit card deals:

JPMorgan Chase & Co. has quietly ceased filing lawsuits to collect consumer debts around the nation, dismissing in-house attorneys and virtually shutting down a collections machine that as recently as nine months ago was racking up hundreds of millions of dollars in monthly judgments…It is unclear whether Chase has stopped pursuing collection on many claims nationwide, or if intends to pursue the debts in some other fashion. The bank has not explained its apparent moratorium and declined comment.

Chase’s halt does, however, follow scattered defeats in state courts and a whistle-blower’s allegation that it falsely overstated the balances of thousands of delinquent accounts it sold to a third party. Former Chase employees and debt collection experts insist that the bank would not have abruptly retreated from its collections efforts in the absence of trouble. […]

Robo-signing, or the high-volume production of signed legal documents, has been a key element of the governmental and media foreclosure reviews. Chase’s current pullback raises at least the possibility that at least some banks may have documentation problems in other business lines…”If sloppy record keeping and problems with false affidavits is a problem with mortgages, it’s 100 times bigger in credit card accounts,” says Michelle Weinberg of the Legal Assistance Foundation of Metropolitan Chicago.

As one finance blogger put it, “When a bank leaves money on the table for no obvious reason, you know that something’s not quite right.” It seems that JP Morgan, and who knows how many other banks, were attempting to collect on debts without being certain that the amount they were asking for was accurate. One whistle blower looked at $200 million in JP Morgan customer accounts and claims to have found that “half the accounts lacked adequate documentation of judgment and one-sixth listed the wrong amounts owed.”

Banks have been robo-signing documents since as least 1998, as an Associated Press investigation found, and its not all that surprising that a practice that worked so well for so long (at least in the eyes of the banks) would have migrated to other areas.

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