The nation's largest issuer of credit cards, JPMorgan Chase
& Co., has agreed to settle a major class action lawsuit that
charged the bank with breaking a promise to more than 1 million
customers -- and overcharging them.
The company agreed Monday to pay $100 million in a case
involving credit card customers who transferred balances from cards
issued by other banks to Chase accounts in return for "fixed"
interest rates that turned out to be anything but.
"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,"
both sides reported to U.S. District Judge Maxine M. Chesney of San
They described the proposed settlement as "an excellent result,
particularly in light of the claims alleged and the risks and delay
associated with ongoing litigation, trial and appeal."
Suit filed 3 years ago
The lawsuit, filed July 24, 2009, alleged that Chase lured
customers by promising monthly minimum payments of just 2 percent
of the total balance until the full amount was paid or the customer
defaulted. But, in January 2009, the bank unilaterally raised the
minimum payment to 5 percent of the balance, according to the
The only way credit card customers could avoid payments that
suddenly were 150 percent higher than promised: Agree to steeper
interest rates, which would elevate their balances and, once again,
Either way, the bank boosted its fees and customers were
compelled to spend more money, the lawsuit charged. "In short,
Chase is using its superior position to breach its contracts and
unlawfully deprive plaintiffs and class members of their long term
loans," the lawsuit said.
The plaintiffs called this practice coercive and its impact "not
"Taking an example of a class member with a $20,000 account
balance, her minimum monthly payment would increase from $400 to
$1,000 in the span of a month," the lawsuit noted. "Over the first
12 months, taking into account principal reduction, her total
payments would be $9,352.77 instead of $4,383.71 -- an increase of
'Implied covenant of good faith'
Chase's action generated more than a dozen class actions suits,
which eventually were consolidated into the case filed in San
Francisco on behalf of 15 Chase customers and the class they
Chase fought the lawsuit for years, asserting that it had done
nothing illegal and that any actions it took were intended to
reduce risk in response to the financial crisis that intensified in
2008. 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."
"This case involved what we view as 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," said Roger Heller, an attorney for
Lieff, Cabraser, Heimann and Bernstein, one of the firms that filed
"The point is that credit card companies should be careful to
use their change in terms provision in an appropriate manner," he
According to the settlement document, the number of affected
credit card owners could exceed the current 1,007,806 names on
file. Under the proposed payment plan, some named plaintiffs will
receive at least $7,500 and others will receive at least $1,000.
Other affected credit card owners will receive a base payment of
$25, with the rest of the money distributed according to the fees
they were charged by Chase.
Paul Hartwick, a spokesman for JPMorgan Chase, said the company
had no comment on the case or the settlement.
The judge is expected to rule on the proposed settlement in