Chase Ordered to Refund $309M to Customers

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The Consumer Financial Protection Bureau (CFPB) ordered Chase Bank and JPMorgan Chase Bank to refund $309 million to over 2.1 million consumers who were charged for fraud monitoring services they did not receive.

The CFPB found that consumers who enrolled in add-on products such as fraud monitoring and identity theft protection services were charged between $7.99 and $11.99 even though the consumers never received these services. Some consumers paid these fees for years without receiving the promised benefits. These customers were under the impression that their credit was being monitored for fraud and identity theft when these services were only partially performed or not performed at all.

In some cases, the costs of these service fees caused consumers to exceed their credit card account limits, subjecting them to further fees. Some customers also paid interest on the fees for the monitoring services that they did not receive.

In response to these findings, the CFPB has ordered the banks to stop charging customers for the monitoring services if they are not provided with the promised benefits. The banks must also take steps to ensure that they do not engage in these unlawful billing practices again.

Chase has taken steps to correct these unfair practices by ending the marketing of these services in April 2011 and issuing consumer refunds in October 2012, according to the CFBB. Most consumers should have received refunds as an account credit or a check by November 30, 2012. Remaining consumers will receive refunds, plus interest and any over-the-limit fees resulting from the charge for the product, within the next few months. If the affected consumer still holds a Chase credit card, the funds will be credited to their accounts. Those who no longer have credit cards with Chase will receive a check in the mail. No action is needed; refunds will automatically be credited.

Under the terms of the agreement, Chase will submit to an audit by an independent auditor who will ensure that the refunds have been appropriately distributed. Chase has also been ordered to adopt stricter management policies of its third-party vendors who provide identity protection services.

The CFPB also ordered Chase to pay a penalty of $20 million to the CFPB’s Civil Penalty Fund.

Chase is not the first bank to be subjected to a penalty by the CFPB. Last year, Discover agreed to pay $200 million in refunds to cardholders who purchased credit protection services over the phone, under the assumption that the services were free. Capital One was also required to pay $210 million to settle similar charges.