This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Credit Card Collections to Continue

Stocks in this article: COF JPM WFC BAC AXP AACC ECPG

NEW YORK ( TheStreet) -- A recent decision by JPMorgan Chase (JPM - Get Report) to drop more than a thousand credit card debt collection cases has thrown a spotlight on another area of potential trouble for the banking industry.

Despite the move by JPMorgan, other banks will plough ahead on existing collection cases.

JPMorgan would not confirm or deny the dismissals, reported by The Wall Street Journal on Friday, though the newspaper quoted Thomas Donnelly, an Illinois state-court judge in Chicago, who said he allowed the bank to withdraw all the pending collection cases in his courtroom this month, though they will be allowed to re-file them later.

"We consider our collections strategy to be proprietary and therefore have no information or comment to share at this time," wrote Paul Hartwick, a JPMorgan spokesman, in an email to TheStreet. Capital One Financial (COF - Get Report) is not withdrawing credit card debt collection cases, spokeswoman Pam Girardo told TheStreet via email.

Lisa Westermann, a Wells Fargo (WFC - Get Report) spokeswoman, said the bank has made no changes to its credit card debt collection activities, which she describes in an email message as "business as usual." She would not say whether the bank is withdrawing cases.

JPMorgan's decision to dismiss the cases raises the question of whether the banking and credit card industries will face similar difficulties with regard to credit card debt collection to those it has faced regarding mortgage servicing. Mortgage servicers, including JPMorgan, Bank of America (BAC - Get Report), Wells Fargo, Citigroup (C) and others, have faced lawsuits and regulatory inquiries accusing them of sloppy mortgage foreclosure practices, and are trying to negotiate a settlement with attorneys general and other regulators that worst-case estimates put at $20 billion. The best known of this type of issue is "robosigning," where middle managers at the banks signed off on hundreds or thousands of foreclosures a month, claiming falsely to have personally reviewed each case in detail.

While those banks and other big credit card lenders, such as Capital One, American Express (DFS)and Discover Financial Services (DFS) sell debt to independent collection companies like Asset Acceptance Capital Corp. (AACC), Encore Capital Corp. (ECPG - Get Report) and Portfolio Recovery Associates (PRAA), they usually try to recover the debt themselves, or they hire a company to do it for them, according to Lawrence Berlin, analyst at First Analysis Securities.

Berlin, who follows the independent companies, says they are unlikely to be caught off guard by legal challenges or regulatory inquiries into their processes and procedures for collecting debt.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,663.19 -9.41 -0.05%
S&P 500 2,054.06 +2.24 0.11%
NASDAQ 4,765.3010 +7.4220 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs