Attorney General Announces $136 Million Settlement with Chase Bank

Tennessee Attorney General Herbert H. Slatery III and Bill Giannini, acting Director of the Tennessee Division of Consumer Affairs, along with 46 other states and the Consumer Financial Protection Bureau, announced a $136 million nationwide settlement with Chase Bank USA N.A. and Chase Bankcard Services Inc.

The agreement requires Chase to significantly reform its credit card debt collection practices and cease collections on more than a half million people nationwide. Among other reforms, the agreement requires new safeguards to help ensure debt information is accurate, provides additional information to consumers who owe debts, and bars Chase’s debt buyers from reselling consumer debts to other purchasers.

“It is important that debt collectors have accurate information when collecting a debt,” General Slatery said. “In some cases, collectors of Chase accounts had the wrong amount listed as the debt, and in other cases, they attempted to collect debts from people who were not even obligated on the account. Chase addressed these shortcomings in the settlement and addressed one particular problem by stopping those who bought the debt from reselling it. Flipping the debt to multiple parties caused all sorts of errors.”

The resale prohibition is significant. Previously, initial buyers of Chase’s consumer credit card debt could resell the debt, the subsequent buyer could flip the debt to another buyer, and the process could repeat itself many times. If initial information about the debt was incorrect at the start, or was transmitted with errors to a subsequent debt buyer, that could result in long-term harm to the consumer and leave the consumer with the difficult, or even impossible, burden of successfully challenging or correcting errors.

"This settlement is another great example of the Attorney General’s Office and the Division of Consumer Affairs working together to help benefit Tennesseans,” said Bill Giannini, Deputy Commissioner.

Some of the allegations involved in the settlement include:

• Subjecting consumers to collections activity for accounts that were not theirs, in amounts that were incorrect or uncollectable.
• Subjecting consumers to inaccurate credit reporting and unlawful judgments that may affect consumers’ ability to obtain credit, employment, housing and insurance in the future.
• Selling certain accounts to debt buyers that were inaccurate, settled, discharged in bankruptcy, not owed by the consumer, or otherwise uncollectable.
• Filing lawsuits and obtaining judgments against consumers by using false and deceptive affidavits and other documents that were prepared without following required procedures, a practice commonly referred to as “robo-signing.” These practices misled consumers and courts and caused consumers to pay false or incorrect debt and incur legal expenses and court fees to defend against invalid or excessive claims.
• Making calculation errors when filing debt collection lawsuits that sometimes resulted in judgments against consumers for incorrect amounts.

As part of the settlement, Chase agreed to cease all collection efforts on more than 528,000 consumers, including an estimated 2,562 in Tennessee. These are consumers Chase, whom it sued for credit card debts and against whom it obtained judgments between January 1, 2009 and June 30, 2014. Chase will notify affected borrowers of the change and will request all three major credit reporting agencies to not report the judgments.

From 2009 until 2013, Chase recovered approximately $4.5 billion of debt from defaulted accounts through collection lawsuits, selling defaulted accounts to third-party debt buyers, or both. Chase suspended its consumer credit card debt sales in 2013 and collections litigation in 2011.

The agreement also ensures that Chase will fulfill $50 million in consumer restitution through a separate consent order reached with the Office of the Comptroller of the Currency in 2013. If Chase’s consumer restitution through the OCC action falls short of $50 million by July 1, 2016, Chase must pay the remaining balance to state attorneys general and the Consumer Financial Protection Bureau.

Consumers may file complaints regarding unfair or deceptive conduct by going online to www.tn.gov/consumer or calling the TDCI Division of Consumer Affairs at (615) 741-4737 or toll-free in Tennessee at 1-800-342-8385.