JPMorgan in $100 million credit card settlement
JPMorgan Chase & Co has agreed to pay $100 million to settle litigation by credit card customers who accused the largest U.S. bank of improperly boosting their minimum payments as a means to generate higher fees.
The class-action settlement resolves a three-year-old case stemming from Chase's decision in late 2008 and 2009 to boost minimum monthly payments for thousands of cardholders to 5 per cent of account balances from 2 per cent.
It comes as JPMorgan, like many of its main rivals, addresses a wide range of litigation over its banking practices, such as whether it conspired to overcharge retailers on card transactions, or manipulated benchmark interest rates.
Cardholders claimed that JPMorgan had induced them to transfer balances from other lenders to Chase card accounts, where the bank would consolidate their debt into loans with "fixed" interest rates until balances were paid off.
But according to the cardholders, JPMorgan boosted minimum payments to force them either to accept higher rates to preserve the lower payment requirement, to make more late payments and trigger more fees or a 29.99 percent penalty interest rate, or to close underperforming accounts.
In a Monday filing with the federal court in San Francisco, lawyers for the cardholders said the $100 million is 45 percent of the $220 million in up-front transaction fees that their clients paid for the promotional loans.
They called the settlement an 'excellent result' for cardholders, who would recover 'a substantial portion of the transaction fees they paid'.
Legal fees would not exceed 27 per cent of the settlement fund, the filing said.
JPMorgan spokesman Paul Hartwick declined to comment. The bank had argued that the changes in loan terms was a sensible means to reduce risk amid uncertain economic conditions.
Based in New York, JPMorgan is among the lenders that on July 13 agreed along with Visa Inc and MasterCard Inc to pay $6 billion to settle retailers' claims that they engaged in anti-competitive practices to fix fees for processing credit and debit card payments.
Regulators are also examining whether JPMorgan and more than one dozen rivals have tried to rig the London interbank offered rate, known as Libor, and other key rates underpinning hundreds of trillions of dollars in assets.
The credit card settlement requires approval by U.S. District Judge Maxine Chesney. A hearing to consider preliminary approval is scheduled for August 3.
In midday trading, JPMorgan shares were down 10 cents at $34.34 on the New York Stock Exchange.
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