Chase settles debt collection probe in suit spearheaded by Iowa attorney general

Chase Bank USA and Chase Bankcard Services have agreed to reform credit card debt collection practices through a $136 million settlement with Iowa and 46 other states, the District of Columbia and the federal Consumer Financial Protection Bureau.

Iowa Attorney General Tom Miller was the lead state attorney general. The state will receive $1.5 million, which will cover the $1 million cost of Miller's office pursuing the case and to enforce consumer fraud laws, including debt collection statutes.

Chase estimates it has provided $43,000 in restitution to 70 Iowa consumers through a separate 2013 consent order reached with the Office of the Comptroller of the Currency.

The agreement requires Chase to significantly reform its credit card debt collection practices in areas of declarations, collections litigation, debt sales and debt buying.

Debt buying involves the sale of debt by creditors or other debt owners, often for pennies on the dollar, to buyers who attempt to collect the debt at full value or sell it to other buyers.

The agreement with Chase requires new safeguards to help ensure debt information is accurate and inaccurate data is corrected. The bank also will provide additional information to consumers who owe debts and bars Chase's debt buyers from reselling consumer debts to other purchasers.

'In many cases, Chase stacked the deck against consumers by pursuing or unleashing collections cases based on information that was just plain wrong or even false,” Miller said in a news release.

'These include instances where the listed debt was the wrong amount, was tied to the wrong person, was discharged, time barred or very old - what's often called ‘zombie debt.' It's an affront to consumers, courts, our laws and fairness.”