Chase Bank USA, the credit card-issuing subsidiary of J.P. Morgan Chase & Co., has agreed to stop charging a $10 per month service charge that it added to over 184,000 of its credit card accounts for customers who transferred balances to their Chase cards.
And as the result of an investigation by New York Attorney General Andrew M. Cuomo, the company has refunded or will refund approximately $4,400,000 to those consumers it had charged under a unilateral change in terms imposed in January.
Chase also faces at least one class-action lawsuit contesting the monthly charges.
Consumers across the U.S. carry over 100 million Chase credit cards. For a number of years, Chase has offered some of its cardholders very attractive promotional rates for balance transfers or other loan amounts put onto their Chase credit card accounts. The offers made clear that a one-time transaction fee, usually three percent, would be charged for this low promotional rate.
Despite the promises Chase made in its offer, in November 2008 Chase notified over 300,000 consumers nationwide, that the terms of the prior offer had been changed. Chase told its cardholders that, in January 2009, it would start charging an additional flat fee — a $10 service charge — each month. This extra $120 per year in additional fees significantly raised the effective APR on these balances, in some cases more than doubling the effective interest rate.
Among those complaining to ConsumerAffairs.com was Peter of Los Angeles: "Transferred balances to Chase at a low rate. Made all payments on time and above minimum. Suddenly found myself paying $10/month service fee forever whether I carry a balance or not, with no notification (but try to prove that you did not get a letter!!).
"The only explanation, 'We did not make enough money off you in the past, so we're making up for it,'" Peter said. "'You have a lifetime offer? Sorry, you just died!'"
In January of this year, responding to consumer complaints, Cuomo's office contacted Chase and requested a meeting with representatives to address these concerns. Upon meeting with Chase, the attorney general's office demanded that Chase cancel the $10 monthly service charges and refund all those that it had collected. On March 26th, Chase agreed to comply.
"My office will not sit back and allow banks to promise one thing in its solicitations and agreements with consumers, and then when times get tough, change the deal, leaving consumers holding the bag, said Cuomo. Truth-in-lending laws prohibit this very conduct. I am glad that Chase has now reconsidered its ill-advised, illegal decision, and will now live up to the terms it originally offered and agreed to.
Under the agreement, Chase will be sending out letters to consumers nationwide telling them that as of April 1, 2009, Chase will no longer be charging them the $10 monthly service charge.
In addition, Chase has refunded or will refund the service charges that it has been charging consumers for the last several months in total amount of approximately $4,400,000. In addition, these consumers will realize savings over the next 12 months of approximately $22,000,000.
