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Class Action Filed Over Chase Credit Card Fees

Bank demands "monthly service fee," higher payments

By Jon Hood
ConsumerAffairs.com

February 4, 2009

The suit concerns Chase's "Balance Transfer Checks," a tool that allows consumers to transfer outstanding balances to their Chase credit cards. The suit alleges that, under the balance transfer program, Chase promised a low annual percentage rate (APR) — typically between 2.99% and 4.99% — not subject to change for the life of the balance.

Beginning in January, however, Chase began slapping a $10 monthly "service fee" onto customers' bills. Consumers who refused to pay found their APR raised, sometimes to as high as 7.99%. Moreover, Chase asserts the right to again unilaterally raise the rate again after a year.

According to the suit, filed in federal court in California, neither the possibility of a monthly fee nor an arbitrary APR increase was mentioned in the cardholder agreement that customers signed when they first received the card. Although the agreement provides for APR increases in certain circumstances — for example, if the customer misses a payment or fails to maintain a certain balance — members of the class had their rates raised despite having met all of their obligations.

The suit further claims that customers who call Chase to inquire about the fee are given no information whatsoever, either as to the purpose of the charge or how it is calculated. The only way for customers to avoid paying the charge is to agree to the APR increase.

The practice is especially damaging to consumers given the nature of the balance transfer program, which is aimed at those who are struggling to pay existing balances on other credit cards, usually at a higher interest rate than that promised by Chase. As described on Chase's website, balance transfer cards are "a great way to simplify your finances. Plus, you can often save money on interest charges if you carry a large balance on a credit card with a higher rate."

Many affected consumers are finding themselves right back where they started when they signed up, or worse. Calvin G. of Brookings, SD says: "I was finally seeing the light at the end of the tunnel, but it just got a little darker again. I find this practice of theirs a total sham, especially to card members who are in good standing. Told the customer rep that I guess they can pretty much do whatever they want and she had no response."

The lawsuit alleges several counts, including violations of the Truth in Lending Act, which requires lenders to clearly spell out terms and conditions in the initial agreement; breach of contract; and unfair competition.

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