Have Banks Been Robo-Signing Credit Card Documents Too?
Several months ago, the nation’s biggest banks became embroiled in the “robo-signing” scandal, when it became clear that they had been approving thousands of foreclosures without verifying the proper documents or guaranteeing borrowers due process. The banks submitted fraudulent documents to courts and were forced to halt their foreclosures processes entirely as they sorted out what happened. “I had no idea what I was signing,” said one Bank of America employee. “We had no knowledge of whether the foreclosure could proceed or couldn’t, but regardless, we signed the documents to get these foreclosures out of the way.”
Robo-signing people into foreclosure is bad enough. But as it turns out, the practice may not have been limited to residential mortgages. American Banker, in fact, notes that JP Morgan Chase may also have been robo-signing credit card deals:
JPMorgan Chase & Co. has quietly ceased filing lawsuits to collect consumer debts around the nation, dismissing in-house attorneys and virtually shutting down a collections machine that as recently as nine months ago was racking up hundreds of millions of dollars in monthly judgments…It is unclear whether Chase has stopped pursuing collection on many claims nationwide, or if intends to pursue the debts in some other fashion. The bank has not explained its apparent moratorium and declined comment.
Chase’s halt does, however, follow scattered defeats in state courts and a whistle-blower’s allegation that it falsely overstated the balances of thousands of delinquent accounts it sold to a third party. Former Chase employees and debt collection experts insist that the bank would not have abruptly retreated from its collections efforts in the absence of trouble. […]
Robo-signing, or the high-volume production of signed legal documents, has been a key element of the governmental and media foreclosure reviews. Chase’s current pullback raises at least the possibility that at least some banks may have documentation problems in other business lines…”If sloppy record keeping and problems with false affidavits is a problem with mortgages, it’s 100 times bigger in credit card accounts,” says Michelle Weinberg of the Legal Assistance Foundation of Metropolitan Chicago.
As one finance blogger put it, “When a bank leaves money on the table for no obvious reason, you know that something’s not quite right.” It seems that JP Morgan, and who knows how many other banks, were attempting to collect on debts without being certain that the amount they were asking for was accurate. One whistle blower looked at $200 million in JP Morgan customer accounts and claims to have found that “half the accounts lacked adequate documentation of judgment and one-sixth listed the wrong amounts owed.”
Banks have been robo-signing documents since as least 1998, as an Associated Press investigation found, and its not all that surprising that a practice that worked so well for so long (at least in the eyes of the banks) would have migrated to other areas.
By: Pat Garofalo, Think Progress, January 17, 2012
Despite Scandalous Abuses, Banks Are Off the Hook Again
Americans know that banks have mistreated borrowers in many ways in foreclosure cases. Among other things, they habitually filed false court documents. There were investigations. We’ve been waiting for federal and state regulators to crack down.
Prepare for a disappointment. As early as this week, federal bank regulators and the nation’s big banks are expected to close a deal that is supposed to address and correct the scandalous abuses. If these agreements are anything like the draft agreement recently published by the American Banker — and we believe they will be — they will be a wrist slap, at best. At worst, they are an attempt to preclude other efforts to hold banks accountable. They are unlikely to ease the foreclosure crisis.
All homeowners will suffer as a result. Some 6.7 million homes have already been lost in the housing bust, and another 3.3 million will be lost through 2012. The plunge in home equity — $5.6 trillion so far — hits everyone because foreclosures are a drag on all house prices.
The deals grew out of last year’s investigation into robo-signing — when banks were found to have filed false documents in foreclosure cases. The report of the investigation has not been released, but we know that robo-signing was not an isolated problem. Many other abuses are well documented: late fees that are so high that borrowers can’t catch up on late payments; conflicts of interest that lead banks to favor foreclosures over loan modifications.
The draft does not call for tough new rules to end those abuses. Or for ramped-up loan modifications. Or for penalties for past violations. Instead, it requires banks to improve the management of their foreclosure processes, including such reforms as “measures to ensure that staff are trained specifically” for their jobs. The banks will also have to adhere to a few new common-sense rules like halting foreclosures while borrowers seek loan modifications and establishing a phone number at which a person will take questions from delinquent borrowers. Some regulators have reportedly said that fines may be imposed later.
But the gist of the terms is that from now on, banks — without admitting or denying wrongdoing — must abide by existing laws and current contracts. To clear up past violations, they are required to hire independent consultants to check a sample of recent foreclosures for evidence of improper evictions and impermissible fees.
The consultants will be chosen and paid by the banks, which will decide how the reviews are conducted. Regulators will only approve the banks’ self-imposed practices. It is hard to imagine rigorous reviews, but if the consultants turn up problems, the banks are required to reimburse affected borrowers and investors as “appropriate.” It is apparently up to the banks to decide what is appropriate.
It gets worse. Consumer advocates have warned that banks may try to assert that these legal agreements pre-empt actions by the states to correct and punish foreclosure abuses. Banks may also try to argue that any additional rules by the new Consumer Financial Protection Bureau to help borrowers would be excessive regulation.
The least federal regulators could do is to stress that the agreements are not intended to pre-empt the states or undermine the consumer bureau. If they don’t, you can add foreclosure abuses to other bank outrages, like bailout-financed bonuses and taxpayer-subsidized profits.
By: The New Yor Times, Editorial, April 9, 2011
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