JPMorgan’s Enormous Legal Bill Is About to Get a Little Bit Bigger
JPMorgan Chase (NYSE:JPM), the largest bank in the United States by assets, has been forced to fork over billions of dollars in litigation fees over the past few years. Bloomberg pegs the amount that the bank has had to set aside at $21 billion, with an additional $8.1 billion set aside to cover mortgage buybacks. In the most recent quarter, the bank reported adding $600 million to its litigation reserves, up from $335 million in the year-ago period.
All told, the bank’s legal bill is enormous, and it’s about to get bigger, even if by just a fraction. Sources told Reuters that JPMorgan is nearing a settlement with regulators at the Office of the Comptroller of the Currency over its credit card debt-collection practices. It would reportedly cost just less than $80 million.
While this violation yielded JPMorgan a financial slap on the wrist, it is just one of as many as hundreds of lawsuits the company is dealing with. In its last 10-Q filing, the bank suggested that expenses related to ongoing and future litigation could exceed its current reserves by as much as $6.8 billion. Speaking at an investor conference recently, Chief Financial Officer Marianne Lake said the bank is increasing its litigation reserves by more than $1.5 billion in the current quarter.
The passage of the Dodd-Frank financial reform act in 2010 has enabled federal authorities to take a tougher position with lenders like JPMorgan. It prohibits banks from using any “unfair, deceptive or abusive practices,” as Richard Cordray, the director of the Consumer Financial Protection Bureau, explained at a July public hearing.
Both the OCC and the Consumer Financial Protection Bureau are looking into concerns that JPMorgan misled customers who purchased credit cards with identity theft protection through a third-party vendor. In part, the investigation is attempting to discover whether it was the bank or its vendor that led customers to believe the protection was free, mandatory, and would improve credit scores, according to sources who spoke to The New York Times.
Separately, Bank of America’s (NYSE:BAC) Merrill Lynch is going to pay a hefty price for a gender bias suit made public this week. According to a Reuters report, BofA will settle at $39 million for policies reflecting gender bias toward female employees. Following a $160 million lawsuit for racial bias at Merrill, Bank of America now has 200 million reasons to adjust workplace policies.
Merrill employees filed the gender bias suit in 2007, and the original plaintiff was based in Miami. Over time, several female brokers joined the suit, which court papers revealed was finally settled as of this week. Reuters reports that a three-year process of improving business practices at BofA is included in the language of the settlement.