Consumers who fall so far behind on their credit card payments that the debt is charged off may be hit with a lawsuit from their former lender, but one of the nation's top financial institutions has recently been dropping such cases in a number of states across the country.
JPMorgan Chase – the nation's second-largest bank which controls more than $100 billion in credit card debt – has quietly been dropping lawsuits over defaulted accounts in five states, and more than 1,000 have been voluntarily dismissed since April, according to a report from the Wall Street Journal. Suits in California, Florida, Illinois, New Jersey and New York have been dropped. But at least in Illinois, they were dropped in such a way that they can also be re-filed.
The move is seen as somewhat odd, however, because they are often very successful, the report said. Industry estimates show that, in all lawsuits over defaulted credit card debt collections, the judgments go in favor of the lender about 94 percent of the time. Some judges said the nationwide average amount sought by the companies in debt collections cases is about $1,000.
However, one Florida-based lender who occasionally handles debt collection cases for JPMorgan said that the company's lawyers told him the suits were dropped due to what they called "irregularities" in the paperwork associated with verifying how valid the pursued debt is, the report said. This is a common problem in lawsuits of this type, and some judges told the newspaper that the documentation is often sloppy or even fraudulent, not that JPMorgan has been accused of this in the dropped cases.
"It's a significant problem … that's widespread and yet given virtually no attention," Philip Straniere, a state court judge who presides in Richmond County, New York, told the newspaper.
In the past year, Straniere has dismissed more than 150 credit card collections lawsuits brought by JPMorgan because submitted paperwork appeared to be marred by the practice known as "robo-signing," the report said. In this controversial process, a small number of people signed off on a significant number of documents without thoroughly reviewing them.
However, many of the nation's top credit card lenders have observed far fewer instances of either delinquent or defaulted credit card accounts in the past year, as borrowers have typically gotten a better handle on taking steps to get out of debt.