A lawsuit over Chase credit card fees has been settled, resulting in the bank having to pay $100 million to customers who were allegedly unfairly gouged by the bank. Chase is said to have tempted customers with low interest rates on transfers, only to hike minimum payments or threaten to pile on fees.
Settlement reached in Chase credit card fees suit
In theory, credit card balance transfers are a great idea. If the interest rate is lower on one card, as much debt as possible should be moved to it in order to consolidate debt at a lower rate and hopefully get it paid off sooner. It’s basically refinancing one’s credit card debt and can save money. It’s almost like getting a cash advance from yourself.
What customers don’t expect is for an avalanche of fees after making the transfer, or for the minimum payment to be raised on them immediately after making a credit card balance transfer. According to Reuters, that is just what happened to a number of JPMorgan Chase credit card holders, who initiated a class action lawsuit over Chase credit card fees in 2009. A settlement in the case has just been reached.
$100 million to be paid out
The class action suit alleges that 1 million people were stung with a higher minimum payment rate upon making the transfer, according to Bloomberg, after being promised a much lower rate.
According to Reuters, the bank had initially promised that customers could make a balance transfer and make minimum payments of 2 percent. However, after making the transfers, the bank bumped the payments up to 5 percent. They then allegedly told customers that if they didn’t, they would face late fees and a 29.99 percent interest rate on their outstanding balances for making late or less-than-minimum payments. However, customers were told they could continue to make the 2 percent minimum payments, but only if they agreed to a higher interest rate than they were promised.
The higher Chase credit card fees, payments and rates, were more than these customers could sit still for, and lawsuits ensued. It became a class-action suit, lodged in 2009. Under the settlement agreement, Chase is agreeing to pay $100 million to the wronged customers.
Will not amount to much
If 1 million people are involved in the suit, each will receive $100. The suit claimed damages of $245 million. Legal fees are going to account for 27 percent of the settlement, or roughly $27 million. In the end, each person who is entitled to a share in the settlement for the Chase credit card fees suit will receive $73, using back-of-the-envelope calculations.
The settlement is due to be reviewed on appeal in August, according to the Los Angeles Times.