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Regulators Investigating Banks’ Debt Collection Practices

Michael Rapp Nov. 19, 2014

Many major U.S. banks are facing increased scrutiny over their debt collection practices. The Office of the Comptroller of the Currency (OCC) is leading a probe into the operations of major financial institutions that include J.P. Morgan and American Express.

The OCC is specifically examining the process by which debt collectors verify consumers’ outstanding debt. The investigation began in 2011 when former J.P. Morgan employee Linda Almonte was fired after she raised concern about delinquent debt inaccuracies to her superiors. Almonte eventually sued J.P. Morgan for wrongful termination, which was settled out of court.

The investigation is part of the OCC’s dedication to enforcing fair lending and increased consumer protection against false or inaccurate debt collection procedures. The OCC often issues fines and/or orders banks to amend its debt collection practices if it believes they are in violation of consumer protection and fair debt collection laws.

In October 2013, the OCC filed a debt collection action against American Express, who incorrectly told borrowers that if they paid off a portion of their debts, the remaining amount would be forgiven. American Express was ordered to pay $112.5 million due to allegations of “abusive collection practices, late-fee charges and deceptive marketing.”

In many cases big lenders attempt to take legal action against consumers with delinquent debt, but are often overruled to lack of proof of the outstanding debt or shoddy testimony. The OCC is fighting to lower the volume and frequency of such cases.