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Chase Agrees to $100 million Settlement Over Credit Card Minimum Payment Hike
July 27, 2012
JPMorgan Chase & Co., the nation's largest issuer of credit cards, has agreed to settle for $100 million a class action lawsuit charging that the bank acted improperly when it more than doubled the minimum monthly payment requirement for over 1 million customers who entered into balance transfer loans with "fixed" interest rates.
"After more than three years of hard-fought litigation, class representatives and class counsel are now pleased to report that the parties have agreed to settle this certified class action," the attorneys for the plaintiffs reported to U.S. District Judge Maxine M. Chesney of San Francisco. They described the proposed settlement, which the Court will review to determine if it is fair, reasonable, and in the best interests of class members, as "an excellent result, particularly in light of the claims alleged and the risks and delay associated with ongoing litigation, trial and appeal."
As reported by the online publication CreditCards.com, the complaint alleged that Chase promised these borrowers low interest rates that were to remain fixed for the "life of loan." But, in late 2008 and early 2009, the bank unilaterally raised the minimum payment for over 1 million of these borrowers to 5 percent of the balance, according to the lawsuit. The only way credit card customers could avoid the higher payments was to agree to a higher interest rate.
Chase fought the lawsuit for years, asserting that it had done nothing illegal. Many of the original charges were dismissed, though the judge allowed to stand a charge that Chase violated "the implied covenant of good faith and fair dealing."
In addition to providing fair compensation to class members, at stake in the litigation are "very important issues between the credit card companies and other financial institutions and their customers, especially on the issue of how and when the companies can use what they call 'contractual discretion' to change the terms of their agreements," Lieff Cabraser attorney Roger Heller stated to CreditCards.com. "The point is that credit card companies should be careful to use their change in terms provision in an appropriate manner."