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Is The OCC Actually Regulating A Bank?


According to the Washington Post, the Office of the Comptroller of the Currency is ramping up its investigation into JP Morgan Chase's credit card debt collection practices. As you may recall, California Attorney General Kamala Harris recently filed a lawsuit against the bank based on its debt collection practices. In my opinion, this is why the OCC has stepped up to the plate with its investigation.

It just looks bad when a federal regulator is shown up by state government. After all, if Chase is behaving badly in California, odds are that it is engaged in similarly bad conduct nationwide. Also, the OCC is expanding its investigation to include several banks. This makes sense. In my experience, most credit card collection lawsuits are poorly documented -- it's not just Chase that has flaws in its system.

As the Washington Post article points out, most credit card collection lawsuits fail to prove that a debt is owed, or that the amount claimed is accurate. A large part of this is due to the fact that debt buyers, who tend to file the majority of these lawsuits, do not receive detailed records for each account that they purchase. In general, they receive a spreadsheet which gives account numbers and balances. The bill of sale relates to a pool of loans, not to each specific loan.

So, how do so many credit card lawsuits result in judgments against the consumer? The two most common reasons are that people ignore the lawsuits and a default judgment is issued and that people often consent to a judgment being entered against them. Judges are under no obligation to defend a lawsuit for a consumer -- in fact, since judges are supposed to be impartial, you could argue that judges shouldn't do the defendant's job. For the most part, judges don't warn consumers before a they consent to judgment. In Illinois, money judgments earn interest at a rate of 9%. I have never seen a judge tell a consumer this fact before a judgment is entered.

It makes me wonder how many people would consent to judgment if they knew.

As I've said many times in the past -- if a debt buyer files a collection lawsuit against you, then it makes sense to fight the case. Odds are that the debt buyer cannot prove its case.