The American Banker reported this past week that JP Morgan Chase and Company has “ceased filing lawsuits to collect consumer debts around the nation, dismissing in-house attorneys and virtually shutting down a collections machine that as recently as nine months ago was racking up hundreds of millions of dollars in monthly judgments” (click here to read the full article).
Why would a major bank suddenly give up on their collection efforts? Is it because they have decided to ease up on people who are hurting because of this awful economy? Of course not!
Publicly, the bank is not making any comment about why it has stopped collection lawsuits.
The article states that a whistle-blower has alleged that the bank “falsely overstated the balances of thousands of delinquent accounts it sold to a third party.” Since the bank won’t comment, we can only speculate.
So what does all this mean for Georgia consumers? I think it means that more people will be able to ignore JP Morgan Chase without fear of a collection lawsuit being filed against them. The harassing phone calls will continue but no collection lawsuits are going to be filed until they get their paperwork in order.
In Georgia, a creditor must first file a collection lawsuit against you to collect on a credit card. After they receive the judgment, they will use it to:
1. Take all of your money out of your checking account;
2. Garnish 25 percent of your net paycheck; or
3. Put lien on your house that will collect 12 percent interest per year until it is satisfied.
Many consumers will file either a Chapter 13 or a Chapter 7 to stop a garnishment or a collection lawsuit.
This past month, I have noticed a sharp drop for collection lawsuits in Floyd County, Georgia. I predict that in the short run, we will see a drop in consumer bankruptcy filings.
Eventually, JP Morgan Chase will get their paperwork in order and start trying to collect once again. Last year, they collected over 1.4 billion dollars from delinquent credit card accounts. I can’t imagine any bank giving up on that kind of revenue source.
3. How much does it cost to file?
4. How do I stop a garnishment?