JPMorgan Chase & Co. has agreed to pay credit card customers $100 million as part of a class action lawsuit settlement resolving allegations it improperly increased their minimum payments as a means to generate higher fees.
The Chase credit card settlement will resolve a class action lawsuit filed three years ago over Chase’s decision in late 2008 and 2009 to boost minimum monthly payments for thousands of cardholders from 2 percent to 5 percent of account balances. Cardholders alleged in the class action lawsuit that JPMorgan induced them to transfer credit card balances from other lenders to Chase card accounts, where the bank promised to consolidate their debt into loans with “fixed” interest rates until the balance were paid off.
According to the class action lawsuit, however, JPMorgan increased minimum payments to force them to either accept higher rates in order to keep the lower payment, to make more late payments and trigger more fees or a 29.99% penalty interest rate, or to close underperforming accounts. This manipulation resulted in millions of dollars in additional fee income from thousands of new cardholders, the class action lawsuit said.
This isn’t the first time JPMorgan Chase has been accused of overcharging customers. The bank reached a $110 million class action lawsuit settlement this year over allegations it manipulated debit and ATM transactions in order to maximize the number of overdraft fees it could collect.
Lawyers for the cardholders said in court papers that the $100 million class action settlement is 45% of the $220 million in up-front transaction fees that their clients paid for the promotional loans. They called the class action lawsuit settlement an “excellent result” for cardholders, who would recover “a substantial portion of the transaction fees they paid.”
The Chase credit card class action settlement still requires final approval by U.S. District Judge Maxine Chesney at an August 3, 2012 hearing.
The case is In re: Chase Bank USA NA “Check Loan” Contract Litigation, Case No. 9-md-2032, U.S. District Court, Northern District of California.
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