Although a new lawsuit was filed against
JPMorgan Chase & Co.
), the company's stock price rose 2.7% on Dec 18. The price
appreciation was primarily driven by the Federal Reserve's
announcement of the "tapering" of bond buying, which reflects
signs of growth in the U.S. economy.
Earlier this week, JPMorgan was sued by the state of Mississippi.
The state Attorney General (AG) accused the bank of violating
several provisions of the Consumer Protection Act while
collecting credit card debt from customers.
Apart from JPMorgan, Couch, Conville & Blitt, a New
Orleans-based law firm that was hired for collections litigation
beginning 2009; Mann Bracken LLP, a now defunct firm hired for
arbitration claims; and NCO Financial Systems, one of the many
collection agencies, were accused in the lawsuit.
In the case filed in the Chancery Court of the First Judicial
District of Hinds County, the AG accused the company of
deliberately making false and misleading statements while
collecting credit card debts. The lawsuit was filed after 18
months of investigation and several months of discussions with
The suit alleged that JPMorgan's debt collection process had
several flaws ranging from violation of the Service members Civil
Relief Act to errors in record keeping in Microsoft Excel. The
company pressured customers to pay for debts that had been
already collected or were not owed by them. Additionally, the
bank sold debt collection rights on credit card accounts - that
were closed due to bankruptcy - to outside agencies and condoned
repeated errors by its third-party collections attorneys.
The lawsuit further alleged that JPMorgan's faulty debt
collection practices are not recent but date back to 2007. It
claims that such malpractices increased manifold following the
financial crisis that led to a rise in the number of credit card
All these had adversely affected customers' credit score. It
became difficult for them to refinance their residential
mortgages and take a car or a student loan.
The state AG is seeking up to $10,000 from JPMorgan for each
violation of the Consumer Protection Act and compensation for the
state's legal cost for pursuing the litigation.
This is the second lawsuit filed against JPMorgan concerning its
debt collection practices. In May 2013, California sued the
company on similar charges. Moreover, several other states are
investigating the bank's collection processes. Additionally, in
Sep 2013, the Office of the Comptroller of the Currency (OCC)
fined JPMorgan a sum of $80 million and ordered it to refund $309
million to aggrieved customers for charging fees for services it
We believe that JPMorgan's run-in with regulators and other
investigation agencies will likely continue for some time now.
Higher litigation costs continue to hamper the company's
Currently, JPMorgan carries a Zacks Rank #4 (Sell). Some
better-ranked finance stocks worth considering include
Fifth Third Bancorp
Huntington Bancshares Inc.
). All these carry a Zacks Rank #2 (Buy).
COMERICA INC (CMA): Free Stock Analysis
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