Another Class Action Lawsuit on the Horizon for JPMorgan Chase?
The past year has seen an increase in settlement payments by JPMorgan Chase (NYSE:JPM), with $4 billion agreed to or paid resolving claims of the bank’s possible knowledge of fraud and market manipulation by its former employees in just the “London Whale” and Madoff cases. The investment giant is now facing the possibility of a new class action suit, alleging a familiar theme, that could lead to a similar settlement agreement.
As reported in the South Florida Business Journal, Miami resident Ruth E. Moya filed a lawsuit against JPMorgan earlier this month in Florida’s Southern District, alleging the bank’s return to “robo-signing” procedures after she was hit with a judgment greater than her past due balance. Instead of the highly criticized technique being used to rush mortgage paperwork without checking for accuracy, as is alleged to have been at the heart of 2010’s foreclosure crisis, Moya accuses JPMorgan of employing the same methods to quickly produce paperwork needed to initiate lawsuits against credit card holders.
According to the federal suit, which seeks to form a class action, JPMorgan employees regularly “robo-signed” large batches of faulty affidavits supporting default on credit card holders in order to speed up the process. Moya’s case cites JPMorgan’s policy of administering bonuses based on volume as the motivating factor behind the practice of allegedly sending out up to 2,000 affidavits a day that were not properly researched or substantiated and resulted in mistake-filled lawsuits against the credit card holders. The suit also claims that affidavits were improperly notarized, without notaries witnessing the signatures they certified.
Alleging violations under federal racketeering standards as well as fraud, the lawsuit is similar to those filed by Mississippi and California last year, and seeks reimbursement of monies lost as well as damages. While JPMorgan had no comment on the Moya case, it responded to an inquiry brought by the Office of the Comptroller of Currency by noting that it had stopped credit card litigation in 2011 and had initiated an internal review of credit card debt collecting procedures in 2010.
A federal judge in New York approved a $218 million settlement last week, resolving class action litigation against JPMorgan stemming from the Madoff Ponzi scheme and any claims that the bank had a central role in the matter. The judgment is part of the $2.25 billion total JPMorgan has agreed pay to resolving accusations related to the fraud in which Madoff customers lost over $17 billion. JPMorgan’s final settlement number might run greater, however, as a new suit filed in New York alleges that the bank knew more than what was agreed to within the terms of the settlement deal it struck with the government back in January.
As far as JPMorgan is concerned, the bank’s settlement agreements over the “London Whale” trade scandal last year are taken care of. The cost of resolving accusations surrounding $6 billion in losses found to have been caused by false filings and manipulation of the derivatives market by former JPMorgan banker, Javier Martin-Artajo, topped $1b billion last October when JPMorgan agreed to pay $100 million to settle the Commodity Future Trading Commission’s investigation. The resolved the CFTC’s probe, along with other accusations by U.S. and UK regulators regarding lax oversight and violations of securities laws leading to the fiasco and loss of investor confidence.
JPMorgan isn’t the only large bank coming under recent scrutiny over their debt collection procedures, however. Last week, an article by The Washington Post detailed a lawsuit surrounding a 150 page Wells Fargo manual, which instructs their lawyers on ways to proceed with a mortgage foreclosure when an endorsement, key to proving who owns the loan, is missing.