Anyone in Atlanta who has been seriously delinquent with credit card payments probably knows that banks will often file lawsuits against consumers to collect on the debt. Generally, the suits aren't worth more than a few thousand dollars each. The bank, though, is thinking about the big picture: Multiply that thousand dollars by a few thousand debtors, and those collection lawsuits can add up.

They can really add up. From lawsuits and other collection activities, JPMorgan Chase & Co. recovered $1.4 billion last year. When Chase backed off on collection suits, then, both the industry and consumer advocates raised their eyebrows.

Chase has not commented on the moratorium, but the Wall Street Journal said that the bank had dropped "more than a thousand" collection lawsuits, nationwide, by April 2011. Speculation about the reason abounds.

The Journal also said that a familiar term came up among attorneys who worked for Chase: robo-signing. As one consumer advocate said, "If sloppy record keeping and problems with false affidavits is a problem with mortgages, it's 100 times bigger in credit card accounts." She added, however, that it seemed unlikely Chase would have been sloppy about its credit card records.

The courts haven't seen any big-ticket record problems with Chase, either. The bank's records have been an issue in just a handful of low-profile cases.

The theory got a boost, though, when a whistle-blower claim against the bank settled last year. An employee from one of Chase's credit card services divisions claimed she was fired after she questioned the bank's sale of $200 million in legal judgments. Bank attorneys had obtained the judgments, but many accounts lacked adequate documentation of the judgment or incorrectly stated the amounts owed.

We'll talk about how it turned out in our next post.

Source: Collections & Credit Risk, "Chase Suspends Filings Suits Over Consumer Cards, Other Debts," Jeff Horwitz, Jan. 12, 2012