According to a report by the Wall Street Journal, JPMorgan Chase & Co. has dropped more than 1,000 credit card debt-collection lawsuits in several states, including Florida, California, Illinois, New York, and New Jersey. As of March 31, 2011, the WSJ estimates, JPMorgan was owed $45.9 billion in outstanding credit card debt in those states alone.

The bank did not give any reason for withdrawing the lawsuits, and the bank may plan on refiling them in the future. JPMorgan obtained dismissals without prejudice from the state courts in which they were filed, meaning they can re-file the suits in the future should they wish to.

The Wall Street Journal speculates that JPMorgan’s reason for abandoning these credit card debt-collection lawsuits may be due to irregularities in the documentation used to file them, just as we saw in the foreclosure crisis. The bank has been accused of “robo-signing” foreclosure documentation, which led to many of the documents being submitted to foreclosure courts being inaccurate or even fraudulent.

If the same issue has arisen in their credit card collections, JPMorgan could be exposed to a serious threat from lawsuits by state and federal regulators, consumer groups, and credit card holders. The number of credit card accounts held by banks far outnumbers mortgage accounts.

If you receive notice that a JPMorgan credit card debt lawsuit against you has been dropped, contact your attorney. If you don’t have an attorney, consider consulting one. Even if JPMorgan does not refile the lawsuit, there could be tax consequences: You could owe tax on any canceled debt.

Know your rights when collectors contact you about credit card debt

If you owe substantial credit card debt, you need to know your rights. Under the Fair Debt Collection Practices Act, debt collectors are required to explain certain rights and give you certain information the first time they contact you. They must tell you:

  1. The amount of debt owed
  2. The name of the creditor
  3. That you have 30 days to dispute the validity of the debt
  4. That the debt will be considered valid unless you dispute it within that period
  5. That you have the right to ask for verification of the debt

Threats of physical violence or other harm to debtors or their family members, abusive language, continuous phone calls and certain other forms of contact is illegal under the Fair Debt Collection Practices Act. If you are experiencing creditor harassment, you should contact a lawyer.

Source: National Journal, “J.P. Morgan Drops More Than 1,000 Credit Card Debt-Collection Lawsuits,” Catherine Hollander, June 24, 2011