Former Exec Accuses JPMorgan of Illegal Credit-Card Debt Collections

Last Updated Dec 21, 2010 2:57 PM EST

JPMorgan Chase (JPM) may be up to its old robo-signing tricks again. Except this time the customers getting screwed aren't homeowners facing foreclosure, but credit-card holders, a former employee with the banking company alleges.

Linda Almonte, a mid-level executive in JPMorgan's credit-card litigation unit, recently filed a whistleblower complaint with the SEC claiming that the company illegally rubber-stamped thousands of documents in collecting payment on overdue accounts. Almonte says the company failed to verify even basic information before the debt was sold to collection agencies. That includes whether the amounts customers owed had been properly calculated and that the appropriate bank and court officials had reviewed the documents.

Robo-signing was rampant, Almonte claims. Low-level bank staff churned through piles of "judgment accounts," the legal determinations giving JPMorgan a right to collect unpaid credit card debt:
On numerous occasions, Ms. Almonte witnessed these affidavit signers work through at times 3-feet tall stacks of judgment affidavits at once during weekly, multi-hour long, non-related company meetings. The notaries were not present at these meetings.
It gets worse. Almonte, who in 2009 had been assigned to review how JPMorgan handled judgment accounts before they were sold, discovered that 20 percent of the customer files had errors. Some 40 percent lacked the court-required documentation. Sometimes, the paperwork showed that JPMorgan had no right to collect payment at all.

Bank personnel also commonly shredded pertinent information, such as bankruptcy notices and records of customer communications. In a "large number" of accounts, the complaint states, customers owed less than what the company claimed. Almonte and her team also found files with documents showing that customers had paid their credit card obligations in full.

What happened next will surprise no one familiar with how big financial companies tend to treat squeaky wheels:
... Chase Bank executives specifically instructed Ms. Almonte to ignore those documents and sell those accounts as judgment accounts without adjusting the account balance.
After Almonte expressed concern about what she'd found to her immediate supervisor and eventually to more senior execs, she was fired (even as an in-house attorney was traveling to New York to meet with her). The accounts she'd flagged, which reflected debt worth $200 million, were subsequently sold to a collection agency.

JPMorgan denies Almonte's charges. A spokesman told DailyFinance's Abigail Field that the company has "thoroughly researched these allegations and are confident that the sales of these loans were handled properly." Could be. For Almonte's part, her attorney says she has copious evidence to substantiate her claims.

Defenders of the bank will presumably seek to tar Almonte, who has filed a wrongful termination suit against JPMorgan, as a disgruntled employee. That, too, is possible. (Ever meet a happy whistleblower?) Others will disparage anyone who doesn't pay their credit-card bills as a deadbeat, and thus deserving of their fate.

But neither critique addresses the highly specific nature of Almonte's complaint. Meanwhile, under our legal system even deadbeats are entitled to due process. In addition, her accusations jibe with what we learned about the widespread robo-signing at JPMorgan, which this fall forced the company to halt more than 50,000 foreclosures.

Indeed, the M.O. is suspiciously familiar: Contempt for legal procedure, falsification of customer records, systematic mishandling of documents, indifference to accuracy. It's also broadly consistent with other large banks' mistreatment of customers, such as Wells Fargo (WFC) deliberately gouging people with overdraft fees.

In commenting on JPMorgan's use of robo-signing, CEO Jamie Dimon in October said there was "almost no chance we made a mistake" in dealing with borrowers facing foreclosure. That is demonstrably wrong. Is there reason to think JPMorgan is any more adept at dealing with credit-card customers?

Images from morgueFile
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  • Alain Sherter On Twitter»

    Alain Sherter is an award-winning business journalist who has written for The Deal, MarketWatch and Thomson Financial Media.

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