Controversial robo-signing practice could extend to credit cards

Friday, June 24th, 2011 By

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JPMorgan Chase has allegedly withdrawn credit card suits because suit documents were "robo-signed." Photo Credit: jebb/Flickr.com/CC-BY-SA

JPMorgan Chase withdrew more than 1,000 lawsuits nationwide against delinquent credit card holders over the past few months, for unknown reasons. However, it is rumored the suits are being dropped because many of the suits were “robo-signed,” or initiated without sufficient review of the paperwork.

Spontaneous withdrawal of credit card suits raises eyebrows

Credit card companies sue people for not paying their credit card debts every day. Any person can look at the court filings section of the local newspaper and see several suits being initiated against a delinquent borrower on any given day of any given week. However, when one of the nations’ largest banks withdraws a large number of suits without explanation, it looks odd.

Recently, according to the Wall Street Journal, JPMorgan Chase withdrew a large number of lawsuits from various courts in several states over the past few months. It is believed that more than 1,000 individual suits were withdrawn from courts in California, New York, New Jersey, Illinois and Florida since April without much explanation. However, it is rumored that the suits were “robo-signed” just like the rubber-stamped mortgage foreclosures that caused a scandal.

Too many potential robo-signings to ignore

JPMorgan is the second largest bank in the United States in terms of assets. JPMorgan is owed $45 billion in the five states where the suits were withdrawn, in delinquent and current accounts. It is said that paperwork in credit card lawsuits, though, is not up to snuff. A New York judge was quoted in the Wall Street Journal as saying that that number of potentially “robo-signed” credit card lawsuits was “significant.” The judge also had dismissed 150 credit card suits in the past year for having large amounts of paperwork signed by the same people.

A lawsuit was filed against JPMorgan in San Antonio last year, according to Fortune, due to large stacks of legal papers having been signed by the same attorney without having done the due diligence on the numbers. Forbes notes that at least one person has been fired for questioning practices of selling off portfolios of write-offs to debt collectors, which are delinquent credit card debts for collectors to try and collect on.

Not unheard of

Banks not following the best practices concerning legal action on bad debts is not unheard of. Earlier this year, no less than 38 state attorneys general petitioned for a class action suit settlement to be far higher in the case where Encore Capital Group was sued by 1.4 million people for “robo-signing” affidavits in debt collection suits, according to Reuters. Encore settled for less than $6 million, which was considered pitifully low by the panel of state lawyers, as it amounts to about $10 per person. The banking industry was infamously found to have signed foreclosure documents regularly nationwide without having done all the legwork to see if the foreclosures were valid, and a debt collection company is not likely to go through a bank’s files to see if they are suing to collect a valid debt.

Sources

Wall Street Journal

Fortune

Forbes

Reuters

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