When lenders obtain judgments against their customers that fail to paycredit card debt, explains attorney Marc Wites of Wites & Rogers, they will often sell these judgments to debt buying companies in large volume at a discounted rate. In selling these judgments, which are sometimes referred to as “accounts,” it is far less complicated for the seller to draft a sale agreement that says the buyer is purchasing the accounts “as is”, rather than doing the due diligence in reviewing hundreds of thousands of accounts, if not millions of accounts for accuracy. Marc Wites believes that this may result in attempts by debt buyers “to collect on an amount that may not be accurate or on a judgment that does not exist.”
Chase Bank was recently in the news regarding this very issue, according to an article in American Banker on January 10, 2012. Chase is subject to a Whistleblower Lawsuit involving Linda Almonte, a former team leader in Chase’s San Antonio credit card services division. She had accused the bank of firing her for objecting to the sale of $200 million in legal judgments obtained by bank attorneys because half of the accounts lacked adequate documentation that those accounts had judgments on them and that one-sixth of the accounts listed incorrect amounts owed. Almonte’s suit was filed in a U.S. District Court in the Western District of Texas. After Chase failed to get the case dismissed, they reached a settlement agreement with Almonte, the terms of which were not disclosed.
In the wake of this case, there has been a complete halt of the filings of Chase collection lawsuits in five states and a recent sharp decline in Illinois has been reported. American Banker conducted the search of the electronically searchable court records in major cities in California, Florida, Illinois, Maryland, New York and Washington to obtain these results.
An example of this decline in Chase collection suits can be shown right here in South Florida. As reported by American Banker, “In Dade County, Florida, which includes Miami, Chase filed 640 collections claims in January 2011, most seeking between $3,000 and $12,000. On Jan. 4 alone it filed suits seeking over $200,000, which represents a rate of $50 million annually. But in April of last year, Chase ceased filing claims altogether in Dade County. That month, The Wall Street Journal first reported that Chase had dropped “more than a thousand” consumer debt cases around the country. Some contract attorneys cited documentation irregularities for the move, the paper reported.” However, it is unclear if Chase has stopped seeking collection of its claims on a nationwide basis or if it will find other means to pursue the collection of these accounts.
Wites & Rogers has found that the threat of litigation is a well known collection tactic used to influence a consumer to try to resolve their debts, the absence of which could explain Chase’s recent decline in recoveries. Marc Wites of Wites & Rogers represents consumers in credit card collection cases. Both, Mr. Law t Steven Canter report that Chase has dismissed cases against his firm’s clients, and that other cases brought by Chase are at a stand still. He likened the situation to that of robo-signing in the mortgage foreclosure industry, explaining that “just as a bank must prove with admissible evidence that it actually owns the mortgage upon which it seeks to foreclose, a credit card company must prove that it owns the account and the debt in order to seek to collect from the consumer.
