Do we have a credit-card robosigning scandal on our hands?
A report Friday suggests that the banks' contemptible failure to maintain proper records– exposed during the foreclosure scandals of the past year – hasn't been limited to their boom-and-bust mortgage businesses.
JPMorgan Chase (JPM) has dropped more than a thousand debt-collection suits aimed at people who defaulted on their credit cards, the Wall Street Journal reports. The decision to drop some suits in five states will cost Chase some money, but the bigger issue by far is the possibility that the banks' record-keeping failures aren't limited to their notoriously lax mortgage lines.
This could invite more regulatory scrutiny at a time when the Jamie Dimons of the world are already whimpering about how hard their lives are, liberal housing allowances and all. That means the labor-intensive back-office cleanup the banks are belatedly undertaking stands to get even costlier.
The issue here is not the money at stake in the suits JPMorgan has dropped. While the Journal notes the bank had $46 billion in credit card receivables in the five states where it has dropped suits, the actual sums involved in the cases dropped so far are likely not very meaningful to JPMorgan's bottom line.
Assuming the bank has dropped 1,000 cases against debtors with an average balance of, say, $30,000 -- twice the national average balance – the amount JPMorgan is forgoing is on the order of $30 million. That's about 12 hours' worth of profits at the first-quarter rate. Dimon could probably absorb that hit out of his own pocket without flinching, not that he's likely to.
But the story suggests that the problem probably isn't limited to these cases. That was certainly the observation in the robosigning episode, which kept getting bigger and bigger even as the banks claimed it was no big deal. And then there was that swell case where Dimon fairly thundered that JPMorgan hadn't foreclosed on any military families only to have the bank admit a couple months later that it actually, um, had. Again with the ineptitude.
So we could be looking at the tip of the credit card iceberg here. Certainly this doesn't sound like a sound banking practice:
In a federal-court lawsuit filed last year against J.P. Morgan inSan Antonio, a former assistant vice president at the bank who worked on sales of delinquent credit-card loans alleged that employees known as "attorney liaisons" signed "multiple stacks of affidavits" filed as part of credit-card lawsuits without "looking at any accounts at all."
No, of course not. They were too jammed to look at the accounts. And the honchos at JPMorgan, the supposed good guys of the U.S. banking industry, will find themselves busy backpedaling yet again.
Ally Bank can't quite kick its robosigning problem.
Ally, the government-owned lender that operates the GMAC car-lending business as well as a big mortgage company, said Tuesday it has resolved 90% of the foreclosure cases that were put on hold last fall when it came to light the bank's processes had run afoul of state laws.
Ally said that of 25,000 or so affidavits that it identified for review at the end MOREColin Barr - Feb 1, 2011 2:36 PM ET
New Jersey has fired a shot across the banking industry's bow.
The state's Supreme Court ordered the biggest lenders to prove they are acting lawfully in processing foreclosures. While that only seems like common sense, Supreme Court Chief Justice Stuart Rabner told the Wall Street Journal he believes this is the first case in which the state courts have placed that particular ball where it belongs, in the bankers' court.
"It's important MOREColin Barr - Dec 21, 2010 10:59 AM ET
Is Wells Fargo's foreclosure process really as sound as the giant bank says?
That's the question raised Friday by a report in ProPublica. The investigative journalism outfit says it has located another Wells (WFC) employee who has admitted to signing foreclosure affidavits without reviewing the case files as required.
The employee, Tamara Savery, twice submitted unverified documents to a Texas bankruptcy court, ProPublica reports. Those weren't the only times she ran afoul of MOREColin Barr - Oct 22, 2010 1:24 PM ET
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