Ethical Bank Attorneys Still Missing In Action - Why People Hate the Banks

Why People Hate the Banks
The New York Times by Joe Nocera - OP-ED COLUMINIST - April 2, 2012

A few months ago, I was standing in a crowded elevator when Jamie Dimon, the chief executive of JPMorgan Chase, stepped in. When he saw me, he said in a voice loud enough for everyone to hear: “Why does The New York Times hate the banks?”  It’s not The New York Times, Mr. Dimon. It really isn’t. It’s the country that hates the banks these days. If you want to understand why, I would direct your attention to the bible of your industry, The American Banker. On Monday, it published the third part in its depressing — and infuriating — series on credit card debt collection practices.  You can’t read the series without wondering whether banks have learned anything from the foreclosure crisis, which resulted in a $25 billion settlement with the federal government and the states. That crisis was the direct result of shoddy, often illegal practices on the part of the banks, which caused untold misery for millions of Americans. Part of the goal of the settlement was simply to force the banks to treat homeowners with some decency. You wouldn’t think that that would be too much to ask. But it was never going to happen without the threat of litigation.  As it turns out, this same kind of awful behavior has been taking place inside the credit card collections departments of the big banks. Records are a mess. Robo-signing has been commonplace. Collections practices hurt primarily the poor and the unsophisticated, just like foreclosure practices. (I sometimes wonder if banks would make any profits at all if they couldn’t take advantage of the poor and unsophisticated.)  At Dimon’s bank, JPMorgan Chase, according to Jeff Horwitz, the author of the American Banker series, the records used by outside law firms to sue people who had defaulted on credit card debt “sometimes differed from Chase’s own files at an alarming rate, according to a routine Chase presentation.” It sold debt to so-called “debt buyers” — who then went to court to try to collect — from one Chase portfolio, in particular, “that had long been considered unreliable and lacked documentation.” At Bank of America, according to Horwitz, executives sold off its worst credit card receivables for pennies on the dollar. Its contracts with the debt buyers included disclaimers about the accuracy of the balances. Thus, if there were mistakes, it was up to the borrowers to point them out — after the debt buyer had sued for recovery. Most such contracts don’t even require a bank to provide documentation if it is requested of them. (Bank of America says that it will provide documentation.) Horwitz found a woman who had paid off her balance in full — and then spent three years trying to fend off a debt collector. Sounds just like some of the foreclosure horror stories, doesn’t it? The practices exposed by The American Banker all took place in 2009 and 2010. In response to the problems, JPMorgan shut down its credit card collections, at least for now, and informed its regulator. (It also settled a whistle-blower lawsuit.) Bank of America says that its debt collection practices are not unique to it. Which is true enough. But lawyers on the front lines say that credit card debt collection remains a horrific problem. “Most of the time, the borrower has no lawyer,” says Carolyn Coffey, of MFY Legal Services, who defends consumers being sued by debt collectors. “There are terrible problems with people not being served properly, so they don’t even know they have been sued. But if you do get to court and ask for documentation, the debt buyers drop the case. It is not worth it for them if they have to provide actual proof.” Karen Petrou, the managing partner of Federal Financial Analytics, pointed out another reason these practices are so unseemly. In effect, the banks are outsourcing their dirty work — and then washing their hands as the debt collectors harass and sue and make people miserable, often without proof that the debt is owed. Banks, she said, should not be allowed to “avert their gaze” so easily. “In my church, we pray for forgiveness for the ‘evil done on our behalf,’ ” she wrote in an e-mail.  “Banks should do more than pray. They should be held responsible.”  When I was at the Consumer Financial Protection Bureau a few weeks ago, I heard a lot of emphasis placed on debt collection practices, which, up until now, have been unregulated. So I called the agency to ask if people there had read The American Banker series. The answer was yes. “We take seriously any reports that debt is being bought or sold for collection without adequate documentation that money is owed at all or in what amount,” the agency said in a short statement. “The C.F.P.B. is taking a close look at debt collection practices.”  Not a moment too soon.