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Prepared Remarks of CFPB Director Richard Cordray on the JPMorgan Chase Debt Collection Enforcement Action Press Call

Thank you for joining this call. Today the Consumer Financial Protection Bureau is teaming up with our state partners across the country to take action against JPMorgan Chase for selling bad credit card debt and robo-signing documents in violation of law. This kind of conduct has no place in the consumer financial marketplace. The orders will require Chase to provide specified documentation and information to debt buyers before selling it and to include specified information when filing a lawsuit to collect on it. Chase must also prohibit debt buyers from reselling its debt and is barred from selling zombie debts and other specified debts to third-party debt buyers. Chase must stop, permanently, all attempts to collect, enforce in court, or sell more than 528,000 consumer accounts. Chase will pay at least $50 million in consumer refunds, and $136 million in penalties and payments to the CFPB and states.

From 2009 to 2013, when consumers defaulted on credit card debts, Chase tried to collect by contacting consumers, filing collections lawsuits, and selling accounts to third-party debt buyers. When Chase sold accounts, it provided debt buyers with an electronic sale file containing certain basic information about the debts from its internal databases. Chase was also responsible for preparing affidavits to confirm debts that were used when it or its debt buyers filed lawsuits to collect on these defaulted debts.

The Consumer Bureau, along with Attorneys General in 47 states and the District of Columbia, found that Chase subjected credit card consumers to wrongful debt collections by third-party debt buyers. Among the debts that Chase sold were debts that should not have been sold, including debts that had already been settled by agreement, discharged in bankruptcy, paid in full, disputed by the consumer, or placed on an agreed payment plan. The company also sold some debts that turned out to be owed by deceased borrowers. It should be clear that to subject people to collections efforts when they do not even owe Chase money is sloppy and illegal.

Chase also filed misleading debt-collections lawsuits against consumers using sworn statements that were illegally robo-signed, to obtain false or inaccurate judgments for debts otherwise lacking evidence. Just as robo-signing plagued the mortgage servicing industry after the financial crisis and brought great harm to consumers, robo-signing of credit card debt is equally pernicious. Indeed, we found that Chase filed over 528,000 lawsuits against consumers and provided over 150,000 sworn statements for debt buyers to use in their own collections lawsuits, often using robo-signed documents.

As a result of today’s action, Chase cannot ever collect, enforce in court, sell, or transfer debts for the roughly 500,000 consumers whose Chase credit card accounts were sent into collections litigation between January 1, 2009 to June 30, 2014. Chase will withdraw, dismiss, or terminate any related lawsuits. Chase will also contact credit reporting companies to seek to remove these faulty judgments from consumers’ credit reports. These accounts had an original face value estimated at several billion dollars at the time Chase originally sent them to collections litigation. The actual market value is now estimated to be in the tens or hundreds of millions of dollars. Debt relief of this kind permanently protects consumers from any further collections and judgments on these accounts.

In addition to fixing the harm done to consumers, today’s action is aimed at making sure that Chase never does this again. So we are also ordering Chase to change the way it collects debts so that consumers are protected from future problems. Chase must now require, by contract or agreement, that debt buyers cannot resell debts that Chase has sold unless they are being resold back to Chase. It must not sell zombie debts and other specified debts, including those that have no documentation, have been charged off for over three years, are in litigation, are owed by a servicemember, are owed by someone who is deceased, or are owed by a debtor who is on a payment plan. Chase must also notify consumers when their account is sold, disclose who purchased the account and the amount owed at the time of sale, and inform consumers how they can seek more information about their accounts at no charge. And for at least three years after the debt is sold, Chase must make additional account information available to the debt buyers such as agreements, statements, and dispute records.

Today’s action punctuates the importance of accountability for fairly collecting on consumer debts. Debt collection serves a crucial role in the proper functioning of consumer credit markets. Obviously if lenders and other providers cannot get paid what they are owed, they cannot provide the kinds of financial products and services that consumers need to improve their lives. But how companies go about performing this task can be just as crucial. Our action today puts debt sellers, debt buyers, and third-party collectors on notice that they are all responsible for following the law and must perform their due diligence when collecting debts.

I would like to thank the Attorneys General for their hard work and close partnership with us on this issue and so many others. At the Consumer Bureau, we have been and will continue to be vigilant in taking action against those who deceive and exploit consumers. Thank you.

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.