July 8, 2015

Connecticut has joined with 46 other states, the District of Columbia and the federal Consumer Financial Protection Bureau (CFPB) in a $136 million settlement with Chase Bank USA N.A. and Chase Bankcard Services, Inc. (Chase) to resolve allegations that the bank engaged in unfair, misleading and deceptive business practices – including so-called "robosigning" – in connection with its consumer credit card debt collection business, Attorney General George Jepsen announced today.

In Assurances of Voluntary Compliance entered with each participating state, Chase has agreed to significantly reform its credit card collection practices. The settlement requires $50 million in consumer restitution and prohibits active collection on approximately 500,000 consumer accounts, including about 5,000 Connecticut consumer accounts. Chase will pay an additional $136 million to the states and the CFPB.

Attorney General Jepsen served as a member of the 13-state executive committee that investigated the alleged practices and negotiated the settlement.

"This settlement includes significant consumer restitution and stringent new standards to help ensure that the unfair credit card collection practices do not harm consumers in Connecticut and across the country," said Attorney General Jepsen.  "I appreciate the coordination with my fellow attorneys general as well as the Consumer Financial Protection Bureau, and I am pleased that we have negotiated a settlement that will institute real and meaningful reforms."

The states began investigating Chase in 2013, in coordination with the Consumer Financial Protection Bureau, which has announced its own Administrative Order with Chase. The states alleged that Chase used false, inaccurate and deceptive affidavits in filing lawsuits and obtaining judgements against credit card consumers. This practice is commonly known as "robosigning," and the states alleged that Chase engaged in robosigning both in its own internal debt collection matters and when it sold its debt and provided proof of debt to third-party debt buyers.

The states also alleged that Chase sold credit card accounts to debt buyers with inaccurate or incomplete information and that it sold accounts that should not have been sold for various reasons, including that the account had already been settled or the consumer responsible for the debt was deceased. The states alleged that these practices resulted in consumers being subjected to collections actions for amounts that they did not owe or that were not collectable.

As part of its settlement with the states, Chase must reform both its internal collection practices as well as its practices related to the sale of debt. Among other requirements, Chase will provide accurate documentation and reform practices related to the certification of debts and production of declarations and affidavits.

Chase will also be required to conduct due diligence on third-party debt buyers and, in the future, only sell consumer debts to licensed debt buyers. Debt buyers will be prohibited from reselling the consumer debt – especially significant because it stops a cycle of reselling stale or error-laden accounts to unscrupulous debt collectors – or assessing illegal fees and interest and will be required to comply with all applicable consumer protection laws and regulations.

The settlement 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. Chase estimates that it has provided approximately $152,000 to 230 Connecticut consumers to date. Specifically, Chase will provide to consumers a cash refund of amounts paid in excess of the contractual obligation at the time of a collections litigation referral, plus 25 percent of the excess amount paid. Chase will also refund or otherwise refuse payments from such consumers in excess of the contractual obligation at the time of litigation referral. 

Chase will also seek to withdraw, dismiss or terminate all prejudgment collections litigation on matters pending at any time between January 1, 2009, and June 30, 2014. Where Chase has obtained a judgement on a case pending during this timeframe, it will cease post-judgement enforcement, including any active wage garnishments or bank levies. It will notify consumers that it will not seek to enforce, collect or sell the judgment and will request that the consumer reporting agencies amend, delete or suppress information regarding the judgement on consumer credit reports.

Of the $136 million, $95 million will go to the participating states and $30 million to the CFPB. Connecticut's share will be $1,345,048.96. Of those funds, $134,504 will be designated as a civil penalty and immediately deposited in the state's General Fund. Some portion of the remaining funds – yet to be determined – will be used for no more than two durational positions within the Office of the Attorney General dedicated to assisting and educating consumers and preventing violations of consumer protection and other laws. Remaining funds not used for durational positions will eventually be deposited in the General Fund.

Finally, Connecticut will share in an additional $11 million designated for the executive committee  states to be used in future expenditures relating to the investigation and prosecution of cases involving fraud, unfair and deceptive acts and practices and other illegal conduct related to financial services or state consumer protection laws. Connecticut's share will be $750,000, of which $250,000 will be deposited in the Office of the Attorney General's Consumer Protection Fund, up to $100,000 may be used as necessary to supplement the funding of the durational positions and the remainder will be deposited in the General Fund.

This executive committee allocation brings Connecticut's total share of the settlement funds to $2,095,048.96.

Assistant Attorneys General Joseph Chambers and Matthew Budzik, head of the Finance Department, are assisting the Attorney General with this matter.

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