Hawaii to receive part of $136M settlement for Chase credit card practices

More than $900,000 is headed to the state of Hawaii to fund consumer education, outreach and protection following a federal-state settlement over Chase Bank’s credit card debt collection practices.

The $920,000 payment is part of a $136 million settlement between Chase and attorneys general for 47 participating states, in addition to the District of Columbia, and the Consumer Financial Protection Bureau. Hawaii Attorney General Doug Chin announced the settlement Wednesday. Hawaii’s share of the payment will be used to fund consumer education, consumer outreach, consumer protection enforcement or consumer protection litigation, Chin said.

“While Chase is entitled to collect lawfully on unpaid debts, its practices here were illegal and outrageous. 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,” Chin said.

According to the joint state-federal probe, Chase:

– Attempted to collect debts from consumers for accounts that were not theirs, in amounts not collectible.

– Subjected consumers to inaccurate credit reporting and unlawful judgments that could their ability to obtain credit, employment, housing and insurance.

– Sold accounts to debt buyers that were inaccurate, settled, discharged in bankruptcy, not owed by the consumer, or not collectible.

– Filed lawsuits and obtained judgments against consumers using false and deceptive affidavits and other documents that were prepared without following required procedures, a practice commonly referred to as “robo-signing.” These practices misled consumers and courts and caused consumers to pay false or incorrect debt and incur legal expenses and court fees to defend against invalid or excessive claims.

– Made calculation errors when filing debt collection lawsuits that sometimes resulted in judgments against consumers for incorrect amounts.

“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 Hawaii. 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 Chase will fulfill $50 million in consumer restitution through a separate 2013 consent order reached with the Office of the Comptroller of the Currency. As of Wednesday, Chase had issued 30 checks totaling $26,000 in restitution payments to Hawaii consumers.

If Chases’ overall 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, Chin said.

The settlement further requires Chase to reform its credit card debt collection practices in a variety of areas of declarations, collections litigation, debt sales and debt buying. It also requires safeguards be established to ensure debt information is accurate and provides additional information to consumers who owe debts. It also bars Chase’s debt buyers from reselling consumer debts to other purchasers, a previous practice of Chase.

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 2009-2013, Chase recovered approximately $4.5 billion of debt from defaulted accounts through collection lawsuits, selling defaulted accounts to third-party debt buyers, or both.