State to Receive Nearly $1 Million from Chase Settlement

File photo by Wendy Osher.

By Maui Now Staff

The State of Hawai‘i will receive almost $1 million from a joint federal-state settlement (the “Settlement”), which reforms the unlawful credit card debt collection practices of Chase Bank USA N.A. and Chase Bankcard Services Inc. (“Chase”).

The Settlement involves attorneys general in 47 states plus the District of Columbia and the Consumer Financial Protection Bureau. States not participating include California, Mississippi and Wyoming.

Chase will pay $136 million to 47 states and $30 million to the CFPB. Hawai‘i’s share of the payment from Chase is approximately $920,000. This payment will be used to fund or assist in funding consumer education, consumer outreach, consumer protection enforcement, or consumer protection litigation.

The Settlement will prevent future re-sales by debt buyers, target “zombie debts” and halt collections on 500,000 individual consumer accounts.

“While Chase is entitled to collect lawfully on unpaid debts, its practices here were illegal and outrageous,” Attorney General Chin said. “Our laws forbid anyone from using false or incorrect amounts or robo-signing documents. This settlement holds Chase accountable for its past practices, provides restitution to harmed consumers, and we expect that it will ensure that this won’t happen again.”

“If a company says you owe them money, it better be right,” said State Office of Consumer Protection Executive Director Stephen Levins. “In this case, our investigation revealed that Chase lacked sufficient safeguards to prevent it and others from pursuing collection actions that it had no business initiating, such as, going after the wrong person, demanding excessive payments, and pursuing discharged, time barred or very old debts.”

As part of the Settlement, Chase has agreed to cease all collection efforts on an estimated 500,000 accounts nationwide, including 530 accounts in Hawai‘i. Chase had sued the affected consumers for credit card debts and obtained judgments between Jan.1, 2009, and June 30, 2014. Chase will notify affected borrowers of the change and will request all three major credit reporting agencies to not report the judgments.

The Settlement also ensures that Chase will fulfill $50 million in consumer restitution through a separate 2013 consent order reached with the Office of the Comptroller of the Currency. So far, Chase has issued 30 checks totaling $26,000 in restitution payments to Hawai‘i consumers. If Chases’ consumer restitution through the OCC action falls short of $50 million by July 1, 2016, Chase must pay the remaining balance to state attorneys general and the CFPB.

The Settlement requires Chase to reform its credit card debt collection practices in areas of declarations, collections litigation, debt sales and debt buying. Among other reforms, the Settlement requires new safeguards to help ensure that debt information is accurate and that inaccurate data is corrected. It provides additional information to consumers who owe debts and bars Chase’s debt buyers from reselling consumer debts to other purchasers.

Chase suspended its consumer credit card debt sales in 2013 and collections litigation in 2011. In 2012, Chase maintained approximately 64.5 million open accounts with $124 billion in outstanding credit card debt. From 2009 to 2013, Chase recovered approximately $4.5 billion of debt from defaulted accounts through collection lawsuits, selling defaulted accounts to third-party debt buyers, or both.