JPMorgan Chase (JPM) plans to disband a group tasked with suing consumers to collect delinquent debts, according to former employees and others who were told about the change. The move comes two years after the bank ceased filing collections suits amid scrutiny of the accuracy of its records and court filings.

A bank spokesman said JPMorgan has "no plans to restart" debt-collection suits but was unable to confirm whether it has decided to disband the collection litigation services group permanently.

JPMorgan in January 2012 ceased filing lawsuits to collect consumer card and other debts around the nation, dismissing in-house attorneys and virtually shutting down a collections machine that nine months earlier was racking up hundreds of millions of dollars in monthly judgments.

The bank last week informed employees in its collection-litigation services division that it plans to shut the unit and reassign them to other parts of the company, said former employees and others told of the changes. The San Antonio-based division is responsible for coordinating litigation against delinquent borrowers, maintaining records and managing law firms hired to pursue the bank's claims, the sources say.

The group's roughly 100 employees could be reassigned or let go as a result of the shutdown, the sources say. A JPMorgan spokesman would not confirm the closing or the size of the group.

JPMorgan halted collection lawsuits nearly two years ago after legal challenges and whistle-blower allegations cast doubt on the accuracy of records related to accounts the company had sold to third-party collections firms.

The Office of the Comptroller of the Currency last month issued a consent order requiring JPMorgan Chase to reform its collections department and put in place new internal controls related to its attempts to collect on delinquent accounts via lawsuits and debt sales.

The shutdown of the collection-litigation services group raises the question of whether the bank is bracing for legal challenges in the wake of last month's OCC settlement. The bank's spokesman said the company has reassigned some employees from collections litigation to work on fulfilling the requirements of the OCC's consent order, and that employees at the San Antonio facility are regularly shifted between departments.

JPMorgan Chairman and Chief Executive Jamie Dimon said he intends to make compliance a priority and to exit noncore businesses that carry excessive risk. The company lost $380 million in the third quarter, taking a $7.2 billion charge related to legal costs and bringing its litigation reserves at the end of September to $23 billion.

JPMorgan has come under fire from federal and state regulators for shoddy documentation within its consumer-loan collections group. An American Banker series last year outlined the allegations against the bank, including charges that it cut corners with documentation used internally and filed "robo-signed" documents in court that had not been the subject of legally required scrutiny. In last month's consent order, the OCC accused JPMorgan of suing customers based on faulty documents and understaffing its collections-litigation group.

JPMorgan said in a statement that the issues affected less than 1% of its customers, that it is working to reform its practices and has withdrawn the affected suits.  

JPMorgan's settlement with the OCC appears to resolve the debt-collection issue on the federal level, but the bank may still be open to legal claims from state regulators.

California, which sued JPMorgan in May, is the only state to file claims against the bank so far over its debt-collection practices, but a group of 13 states, led by Iowa Attorney General Tom Miller, has launched an independent investigation into possible violations. Massachusetts has also launched its own investigation.

The California complaint, filed by state Attorney General Kamala Harris, accuses the bank of using widespread robo-signing in its collections efforts. Harris estimates that the bank's attorneys filed more than 100,000 collections suits between January 2008 and April 2011, including more than 450 on a single day in 2010.

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