In an orchestrated fashion, the OCC, CFPB, 47 states and the District of Columbia have entered into consent orders with JP Morgan Chase and related entities.

The OCC Consent Order: Today’s OCC Consent Order resolved an enforcement action that was taken against J.P. Morgan Chase Bank and two of its affiliates in 2013. At that time, a Consent Order was entered into which required corrective action to address deficiencies with Chase’s debt collection practices, as well as its compliance with the Servicemembers Civil Relief Act (the "SCRA"). The Consent Order entered today requires an additional $30 million civil money penalty which comes on top of the $50 million already paid out in restitution pursuant to the 2013 Consent Order. According to the Statement released by the OCC, today’s consent order comes after the OCC has had a "time to assess the full extent of the deficiencies." Like the prior consent order, the OCC Consent Order includes the following findings:

  • The bank filed or caused to be filed affidavits which were not based upon the affiant’s personal knowledge or review of the bank’s relevant books and records;
  • The bank filed or caused to be filed inaccurate sworn documents, resulting in judgments which contained financial errors favorable to the bank;
  • The bank filed or caused to filed affidavits which were not properly notarized;
  • The bank did not have effective policies or procedures in place to ensure compliance with the SCRA;
  • The bank inadequately staffed its sworn documents and collections litigation processes;
  • The bank failed to provide adequate internal controls, policies and procedures, compliance risk management, internal audit, third party vendor management and training as to its sworn document and collection litigation processes; and
  • The bank failed to properly oversee its outside counsel and other third party vendors responsible for the sworn document and collection litigation services.

The CFPB Consent Order: The bigger news is the draconian CFPB Consent Order which is directed to Chase Bank, USA N.A. and its subsidiary Chase BankCard Services, Inc., focuses on the bank’s consumer credit card business line, and places onerous restrictions on Chase’s ability to sell accounts to debt buyers. The order includes findings that Chase violated the unfair and deceptive prohibitions of Dodd Frank by:

  • Selling accounts to debt buyers containing inaccurate information. Specifically, the Order finds that Chase sold:
    • accounts without adequate documentation;
    • accounts that previously had been settled by agreement;
    • accounts that had been paid in full;
    • accounts that were no longer owned by Chase;
    • accounts that had been identified as fraudulent;
    • accounts that were stayed in bankruptcy;
    • accounts that were subject to payment plans; and
    • accounts where the account holder was dead.
  • By using affidavits in lawsuits and providing affidavits to debt buyers that were "robo signed."

Not only does the Order require Chase to pay an additional $30 million in civil penalties to the CFPB, a minimum of $50 million to consumers, and $136 million in penalties to the states, it also:

  • Requires Chase to implement effective processes, systems and controls to provide accurate information to debt buyers and consumers in connection with debt sales after the effective date of the order:
    • including providing the debt buyer with account level documentation confirming the debts are accurate and enforceable, including the first date of delinquency for purposes of credit reporting, the date and amount of the last payment, the date the account was charged off, the unpaid balance due on the account with details of the post charge off balance;
    • making certain account information available to the debt buyer for a minimum of three years after the sale, including the effective contract agreement and statements;
    • providing notice of the sale to the consumer, including the identity of the purchase, the amount owed at the time of sale and making further information regarding the account available to the consumer at no charge;
  • Prohibits Chase from selling certain accounts, including any account:
    • In which the consumer has notified Chase of a dispute, identity theft or unauthorized use and Chase has not been able to determine the consumer owes the debt;
    • In which the account holder is deceased;
    • In which the account is more than three years past charge off or the date of last payment;
    • In which the account holder is a serviceman;
    • Involved in litigation; or
    • Which is currently under a payment plan.
  • Requires Chase to Do Due Diligence Regarding their Relationships with Debt Buyers. The Order:
    • Requires that the Bank properly vet new relationships with debt buyers;
    • Requires periodic due diligence reviews of current forward flow contracts;
    • Prohibits the sale of accounts to debt buyers who cannot certify they or their vendors are not properly licensed or authorized to collect in the states where consumers reside;
    • Requires Chase to include provisions in their sale agreements prohibiting the resale of accounts, and expressly prohibiting certain specified unlawful conduct by debt buyers;
  • Specifies the contents and other requirements for Chase affidavits relative to collection accounts moving forward including a requirement that all affidavits be signed by hand and based upon the direct knowledge of the person signing based upon their review of Chase’s business records;
  • Specifies how Chase is to conduct any collections litigation moving forward;
  • Requires withdrawal, dismissal or termination of all prejudgment collections litigation pending at any time between January 1, 2009 and June 30, 2014; and
  • Requires Chase to cease all post judgment enforcement actions and request that the consumer reporting agencies delete/amend/suppress any reporting of the judgments.