On May 9, 2013, the State of California filed a lawsuit against JPMorgan Chase for allegedly engaging in fraudulent and unlawful debt-collection practices with respect to approximately 100,000 California credit card holders. According to the lawsuit, JPMorgan illegally “robo-signed” documents - meaning it electronically signed documents without reviewing them for accuracy or completeness - and failed to inform credit card holders that it was filing suit, despite claiming that it had provided the legally-required notification. This latter practice is known as “sewer service.” Using these improper tactics, the lawsuit alleges, JPMorgan was able to file thousands of lawsuits on a monthly basis between January 2008 and April 2011. On one day alone JPMorgan apparently filed some 469 new actions against credit card holders. In addition to the State of California’s action, the U.S. Office of the Comptroller of the Currency - one of JP Morgan’s regulators - is reportedly preparing to file an enforcement action against JPMorgan for its credit card debt collection practices.

Additional information is available at: http://www.latimes.com/business/money/la-fi-mo-california-ag-files-suit-against-jpmorgan-chase-alleging-debtcollection-abuses-20130509,0,6695376.story and http://dealbook.nytimes.com/2013/05/09/california-sues-jpmorgan-chase-over-credit-card-cases/?ref=business.

Comment

California’s lawsuit shows that state governmental authorities continue to investigate and prosecute banks for improper behavior. This case is notable because it shows authorities are expanding their banking oversight beyond improper mortgages activity and into other areas where enforcement and consumer protection has been historically lax.