JPMorgan Chase had come under the federal spotlight in 2011. Further probes revealed that the company had been filing lawsuits against debtors and using faulty documents for the purpose.
The enquiry opened up floodgates and the federal regulators have decided to widen their investigation. The investigation will supposedly dig deep into the files of the nation’s biggest banks to find out how many of them are using error-filled records and incomplete documents to collect on the credit card debts.
Though the extent of the inquiry is not well defined, the regulatory authorities are expected to scrutinize how the banks verify the outstanding debts of the consumer’s before dragging them to the court. The banks have been filing thousands of lawsuits against those credit card holders who have defaulted on their bills. As the US citizens fail to continue with their regular payments, the charge-off rates for the credit cards are seen to be gradually rising. Consequently, this is expected to bring in a financial crisis similar to the mortgage robo-signing scandal, which had taken its toll on the housing market.
Numerous collection cases have been found to be based on insubstantial records. JPMorgan Chase came into the notice of the consumer attorneys and the concerned authorities in California, as the bank filed several lawsuits against the delinquent cardholders and backed those up with flawed documents. The state attorney general filed a lawsuit against JPMorgan this month, stating that the bank had issued cards to thousands of Americans, without even authenticating their documents or checking their statements.
A former bank employee, Linda Almonte brought the bank under the scrutiny of the concerned authorities, after she was terminated. The regulators started investigating the debt collection procedures practiced by JPMorgan Chase from 2011, after Ms. Linda filed a whistleblower complaint with the SEC in 2010. Though the Almonte case was settled out of court, the Office of the Comptroller of the Currency (OCC) investigation strengthened their focus on fair lending and consumer protection. As a result, the investigation has widened its scope and decided to find out more about the debt collection practices followed by major banking and financing institutions.