JP Morgan Chase & Co (JPM)

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How a Whistleblower Halted JPMorgan Chase's Card Collections

This is the second in a series on JPMorgan Chase's delinquent credit card collections operation. The first article can be viewed here. Further coverage will follow.

No sooner did Linda Almonte show up for work on November 30, 2009 than was she escorted out the door by security at JPMorgan Chase's Credit Card Litigation Support Group in San Antonio. A midlevel Chase executive who oversaw business process execution employees, Almonte says she was fired after just six months on the job for challenging her superiors about the accuracy of the bank's credit card records.

Colleagues first learned of her dismissal later in the day when operations manager Jason Lazinbat, Almonte's former boss, gathered bank staff in a conference room and announced she was no longer with the bank. Under no circumstances, Lazinbat warned, were staffers to communicate with Almonte, recalls Carole McGinn, a quality control worker who spent 14 years at Chase. The account was confirmed by second employee, who requested to speak anonymously.

"It was an unusual statement," McGinn says. "Other people had left the bank, and we were not told" to cut off contact with them.

The contentious nature of Almonte's departure was a prelude to a series of events that serve as a cautionary tale for the banking industry. The former mid-level staffer eventually filed a whistleblower suit and complaints with regulators that accused Chase of a range of lapses over three years. They include: failure to reconcile the inconsistent past-due balances generated by the bank's computer systems; pressure from management to collect delinquent debts even in the absence of complete or accurate records; and robosigning of affidavits that brings into question the legal integrity of Chase's claims against tens of thousands of consumers.

Many of Almonte's accusations are backed by internal bank documents and current and former employees. What's more, they've forced Chase to cease operations in a collections unit that had previously generated billions of dollars in annual revenues.

Lazinbat did not respond to calls or email messages seeking comment, and the bank previously declined to speak on his behalf. Chase also declined to comment for this story on its own behalf or for the March 12 article.

After publication of that story, however, the bank released a statement saying: "Following issues raised with mortgage documents, we conducted an internal review across the firm and found other procedural issues. We immediately alerted our regulators and worked to address them." With its delinquent credit card customers, Chase added that in the "overwhelming majority of cases" its internal review indicated it had collected the correct amounts.

In contrast, Almonte charged in her wrongful termination suit that Chase fired her for resisting its efforts to sell faulty credit card debts. Chase, in its defense of the suit, made no effort to contest Almonte's allegations about the inaccuracy of its records or to proffer alternative explanations for her firing. Instead, it argued that it could release employees at will under Texas law and was within its rights to sell credit card accounts whose documentation was problematic or missing, as long as it informed buyers.

"[T]he parties explicitly agreed that the judgments were purchased 'as is' and 'with all faults,'" Chase wrote in a brief defending itself against Almonte's wrongful termination suit.

Almonte proved persistent, however. She contacted a number of regulators, including the Securities and Exchange Commission and Federal Trade Commission, expanding on allegations from her wrongful termination suit. She also discussed her complaints with officials from the Office of the Comptroller of the Currency, which oversees nationally chartered banks, including Chase. The OCC dispatched enforcement staffers to the bank's San Antonio facility for two months late last year as part of a still ongoing investigation, as American Banker previously reported.
http://www.americanbanker.com/issues/177_52/jpmorgan-chase-credit-card-collections-1047573-1.html