Chase drops 1,000 debt-collection lawsuits

Without giving a reason, Chase has asked various courts to drop more than 1,000 debt-collection lawsuits against individuals (Lender Drops Pursuit of Debt, Wall Street Journal, 6/24/11).

The suits were dropped without prejudice, meaning Chase can refile them later.

There is some indication that the lawsuits were dropped because of paperwork irregularities, which courts are becoming less tolerant to:

Mitch Granat, a lawyer who handles debt-collection cases for J.P. Morgan in Palm Beach County, Fla., on a contract basis, said he was told by other lawyers for the bank that the suits in Florida were dropped because of “irregularities” in paperwork used to verify the validity of the credit-card debt being pursued. Some judges have complained that J.P. Morgan and other credit-card issuers that go to court to collect what they are owed file lawsuits marred by sloppy or even fraudulent documentation of debts.

The problem is related to the robo-signing problem that has been widespread in foreclosure paperwork. Chase has been accused by several former employees of employing robo-signing tactics on consumer debt affidavits.  One of the former employees claims that Chase has incorrect information on balances owed on thousands of credit card accounts.

There is more indication that Chase may either be abandoning these type of lawsuits as part of its debt collection strategy, or may be switching gears from running its own in-house debt-collection legal team:

Many lenders farm out debt-collection lawsuits to outside law firms. In contrast, J.P. Morgan predominantly uses a team of in-house lawyers scattered across the U.S. Last month, some of those lawyers say they were told by company officials that all the collection offices where they work will be shut down by the start of 2012. J.P.


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